April Supply and Demand Report Recap

USDA released their April World Agricultural Supply and Demand Estimates (WASDE) report this morning and inside was one unforeseen surprise. Corn carry-over (the amount we keep in bins and elevators from one year to the next) was unchanged from the March estimate (801 million bushels) but above pre-report expectations (717 million bushels). The Grain Stocks report released on March 30 revealed less corn on hand than expected (6.01 billion bushels reported versus 6.151 expected). This led most prognosticators to assume less would be available to carry-over into the following year (the highest guess was that corn carry-over would be unchanged). However, USDA is expecting corn used for feed and residual purposes the remainder of this marketing year (September 2011 to August 2012) to be augmented with other small grains like wheat. This would take pressure off the demand for corn the remainder of the year and therefore keep more of it on hand to take into the 2012/13 marketing year. As the wheat crop continues to improve from the expected levels it was at in the final quarter of 2011 as the extreme drought in the Southern Plains was gripping the life out of the crop, this is a plausible assertion. Still, corn stocks are low compared to historical levels and the demand for the product remains strong. Adverse weather across the southern portion of South America will likely keep global supplies in check and the prospect of 95.9 million acres in the U.S. along with early and aggressive plantings is proof positive that U.S. producers sense the corn supply/demand balance remains in their favor. Corn plantings are currently (week ending Apr 8) ahead of schedule. U.S. plantings are 7% complete compared to the prior 5-year average of 2%, while Illinois is 17% complete versus a 1% average.

Soybean ending stocks were lowered 25 million bushels from last month’s WASDE report to 250. Pre-report expectations looked for soybean carry-over to come in at 246 million bushels, so the reported number was not a shock. Soybean crushings and exports were both bumped up by 15 million bushels each which accounted for the reduction in stocks. Seed use was lowered as a result of smaller projected plantings in 2012.

Argentina and Brazil’s production of soybeans was cut down to 21.5 and 66 million metric tons, respectively, compared to 22 and 68.5 reported last month. Corn production in these two countries was reported to be 45 and 62 million metric tons versus 46.5 and 62, respectively for Argentina and Brazil, in last month’s report. Each of these were as expected.

Cotton supply and use were revised favoring producers. As more information flows in with respect to cotton supplies via the Cotton Ginnings report released on Mar 23 U.S. cotton production was lowered from 15.67 million bales projected in March to 15.56 this month (U.S. yield was lowered from 772 to 766). Also, exports were increased 400,000 bales from last month to 11.40 million. Collectively, these trimmed cotton ending stocks to 3.4 million bales.

Rice exports were also the beneficiaries of positive changes. Both rough and milled rice exports were increased by 1 and 2 million hundredweight from last month’s report to 32 and 60, respectively. This lowered carry-over by to 39 million hundredweight.