An outlook on current grain market trends
On November 10, the USDA released the much anticipated USDA supply/demand report. The USDA forecast corn production at 12.9 bil. bu., down 1 percent from last month but 7% higher than 2008. Based on conditions as of November 1, yields are expected to average 162.9 bu. per acre, down 1.3 bu. from October but 9.0 bu. above last year. Despite the drop in yield from October, this yield will be the highest on record if realized. Total production will be second highest on record, only behind 2007. Within the Corn Belt, forecasted yields in Minnesota and Wisconsin increased, while Illinois, Iowa, and Michigan yields decreased.
Since 1981, there have been eight previous years of corn production increases from the September to October reports. In all of those previous years, the USDA also increased production into the November report. This year will be the exception as the USDA lowered production from last month. This will still be the second largest crop in history but the highest yield. In seven of those eight previous years, the USDA has also increased the final production figure from the November report into the final report in January.
The USDA left the old crop feed and ethanol estimates unchanged this month. The only demand revision was a 50 mil. bu. reduction in exports to 2.100 bil. bu. This partially offset the 97 million bushel reduction in the crop size, allowing 2009/10 ending stocks to slide 47 mil. bu. from last month to 1.625 billion. This still represents a nearly unchanged stocks situation from last year, but a slightly tighter stocks/usage ratio of 12.5% vs 13.9% in 2008/09. The ending stocks revision was marginally more than the average trade estimate looking for stocks at 1.650 bil. bu.
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