Fundamentally Speaking
Joel Karlin DTN Contributing Analyst

Friday 08/17/12

Percent Deviation From Trend for 1988, 2012 Corn Yields
This piece compares the percent deviation from the 20 year trend for the top corn states and the U.S. in 1988 and 2012.[Read Full Blog Post]
Posted at 8:04AM CDT 08/17/12 | Post a Comment
Comments (4)
USDAâ?™s antiquated reports, by design or otherwise, are unable to show the real world position. USDA outlines the problems of new crop corn harvested to the old crop year in a July 2012 report titled Implications of an Early Corn Crop Harvest for Feed and Residual Use Estimates located at http://www.ers.usda.gov/media/828975/fds12f01.pdf This should/could be viewed as the model USDA will use for this marketing year. The implication in price action could be quite large for those that are unaware of this model. September 2011-12 WASDE corn ending stocks could increase with the expectation large early harvest. This could be viewed by trading programs as an increase in corn rationing resulting in sell programs. The September stocks report will most likely show larger stocks than expected again triggering selling program because of the appearance that rationing is occurring. A look at the 2012-13 corn balance sheet finds a large reduction in feed and residual use. This decline is not consistent with domestic soybean meal use or livestock products produced in the marketing year. This would imply very little rationing of the livestock sector is expected by USDA. The drop in feed and residual use might be explained as the process needed to balance the balance or they are expecting a large early harvest of the 2013-14 corn crop. Prices for new crop corn from USDA expectations do not appear high enough to ration expected supply.
Posted by Freeport IL at 11:51AM CDT 08/20/12
The World will run out of soybeans prior to a March start of the 2012-13 South American harvest. These are the numbers from the August 2012 WASDE report that shows it. Brazil, according to USDA, will start the 2012-13 marketing year with 12.39 million metric tons of soybeans. They are expected to crush 39.89 million metric tons of beans. In the six months prior to their soybean harvest, starting around March of 2013, they should crush about half of their projected output or 19.95 million metric tons. This will not happen because their beginning balance is less than their projected crush schedule. Brazil exports about half of their soybean meal. So lets assume they crush all their beginning balance and lets other countries supply the balance of 7.55 million metric tons of soybean to be crushed to meal (19.95 â?“ 12.39 = 7.55). Argentina has a beginning balance of 18.27 million metric tons. They are projected to crush 38.2 million metric tons of soybeans to meal. A linear crush schedule would have them crushing 19.1 million metric tons of soybeans in 6 months. Again the schedule is more than the beginning balance. Argentina export about 98% of their meal. So lets assume they crush all their beginning balance and let other countries supply the balance of 0.83 million metric tons of soybean to be crushed to meal (19.1 â?“ 18.27 = 0.83). The US is to have a beginning balance of 3.94 million bushels plus crop production projected at 73.27 million metric tons. This gives a supply of 77.21 (3.94 + 73.27 = 77.21). The World is expected to import 91.88 million tons of soybeans in the 2012-13 marketing year. The beginning World balance is 51.94 million metric tons. When the beginning balance of Argentina, Brazil and the US is subtracted from the rest of the World there is 17.34 million metric tons (51.94 â?“ 12.39-18.27-3.94=17.34). Countries other than Argentina, Brazil and US are projected by USDA to export 12.66 million bushels. So if it is assumed the World draws it stocks to zero and other exports ship their bean in the first six months of the year the US would still need to export 30.94 million bushels prior to South Americas harvest season if Global demand is somewhat linear ((91.88 -17.24-12.66)/2= 30.94). US supply of 77.21 minus first 6 month exports of 30.94 leaves 46.27 million metric tons of soybeans to be crushed (77.21 â?“ 30.94 = 46.27). There should be about 5.9 million metric ton of soybeans crushed and exported by other countries in the first six months of the marketing year. The US has a projected 6 month crush demand of 20.6 million metric ton. Under this scenario the World would have its demand met but have zero stocks prior to the South American harvest. The US would have a balance six months out of 23.19 million metric tons (46.27 + 5.9 -7.55 â?“ 0.83 â?“ 20.6 = 23.19). That is enough to supply 6 more months of crush and a small ending balance. Brazil will not meet its export meal demand. The US and other will crush those beans. Exports will mainly come from the US until harvest starts in South America. If the World requires a minimum pipeline supply of 7% (currently projected at 15%), the World will run out of soybeans prior to the South American Harvest. Based on USDAs projections, soybean and soybean meal prices will have to go much higher to ration supply. This race is to close to call but there will be many losers. It seems highly unlikely US soybean yields can improve enough from the August report to remedy the situation.
Posted by Freeport IL at 8:37AM CDT 08/21/12
There is an error in the calculations. The US supply after bean exports should be 61.27 million metric tons (77.21 - (91.88 / 2 - 17.24 - 12.66 = 61.27)). The US balance six months out becomes 39.02 (61.27 + 5.9 -7.55 - 0.83 - 20.6 = 39.02). Minimum World stocks percentage becomes 10.9%. Sorry for the error.
Posted by Freeport IL at 9:13AM CDT 08/21/12
The USDA's latest crop progress report points to 887 million bushels of new crop corn were harvested in the old marketing year. The vast majority of this grain was most likely consumed in the old year. We will have to see how that works through the September stocks report and maybe even the upcoming WASDE report. USDAâ?™s model, when 41% of the crop is mature on August 31, can be interpolated at 340 million bushels of new corn was used in the old year, USDAâ?™s example was based upon Mayâ?™s feed and residual number. Detrended US planted acres yield (not harvested acres yields) points to a 10.2 billion bushel corn crop and a 2.7 billion soybean production when 1988 yields is combined with June's planted acres. The number to watch is production. Yield and harvested acres need to be combined to have real meaning.
Posted by Jib aka Gibberish at 6:50AM CDT 09/10/12
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