USDA on Thursday forecast a record 13.2 billion bushel corn crop, despite the loss of 1.9 million planted acres from flooding along the Ohio, Mississippi and Missouri Rivers.  The June Supply and Demand Report shook up the market and raised the ante for corn traders by pushing new crop carryover down into the scarce supply category.

USDA incorporated the wet spring weather into the latest crop report by cutting planted acres by 1.5 million and harvested acres by 1.9 million, the latter reflecting an estimated flood stricken crop along primary waterways.  The same was not done for soybeans in the Supply and Demand Report, with USDA crop economists acknowledging slow planting, production estimates and acreage were being left unchanged from earlier reports because there was still time to plant beans.

In addition to reducing the acreage, USDA also reduced the yield expectation because of the delayed planting progress in the Eastern Cornbelt and Northern Plains.  With 83.2 million acres forecast to be harvested, and a 158.7 average yield, production is still forecast at 13.200 billion bushels.  That is matched with a 13.255 billion consumption, leaving only 695 million bushels at the end of the marketing year in August of 2012.  The projection for feed use was cut by 100 million to an even 5 billion bushels.  Ethanol use was left at 5.05 billion, which would be the first forecast by USDA to put more corn into ethanol refineries than into livestock stomachs.  Even with projected high prices for corn, export projections were retained at 1.8 billion bushels.  The average farm price was forecast to range from $6 to $7 for the new marketing year.

Soybean production was forecast at 3.285 billion bushels, unchanged from the May report, with 75.7 million harvested acres and a 43.4 bushel average yield.  USDA adjusted the ending stocks for the old crop upward by 10 million bushels and added that to the total supply of 3.480 billion for the new crop.  The crush estimate of 1.655 was retained, but exports were dropped slightly to 1.520 billion, and the ending stocks in August 2012 were raised to 190 million bushels.  For the coming new crop marketing year, the average price is expected to be $13 to $15 per bushel.  That impacted the oil and meal market with the average price of soybean oil forecast from 58 to 60¢ per pound, and meal prices expected to range from $375 to $405 per ton.

While US farmers have been shifting corn acres to soybeans because of the growing season, USDA says the switch is reversed for Chinese farmers, and that has the impact of reducing soybeans supplies in China while raising more valuable corn supplies.  USDA lowered global corn stocks, but said China would be raising more corn during the year, but there is also an expectation about increased consumption of corn in China, which plays into US markets.  Although China has 46% of the global stocks of corn, it is not expected to export any of it.  USDA reported Chinese corn stocks would be, “just below the levels of the preceding 2 years, better reflecting the continuing rise in domestic corn prices as production struggles to keep pace with rising usage.”

Additionally, USDA says global corn stocks are declining, even in the face of the record crop expected in the US.  “Global corn ending stocks for 2011/12 are projected down sharply this month, falling 17.3 million tons mostly reflecting the usage revisions in China. The projected 5.2-million-ton drop in U.S. ending stocks accounts for most of the rest of the decline. Global corn stocks are projected at 111.9 million tons, the lowest since 2006/07.”

In the soybean balance sheet, USDA had dropped US exports slightly due to the larger Brazilian crop, “Soybean ending stocks for 2010/11 are projected at 180 million bushels, up 10 million. U.S. soybean exports for 2011/12 are reduced 20 million bushels to 1.52 billion, reflecting increased competition from South America resulting from an increase in the recently harvested Brazilian soybean crop.”  The higher prices for soybeans may be dampening the demand, since USDA reported, “Other changes for 2010/11 include reduced soybean oil used for biodiesel production, reduced projected food use of soybean oil, and lower soybean oil exports, all resulting in increased ending stocks for 2010/11 and 2011/12.”  Globally, oilseed projection is down because of lower European rapeseed production due to drought.

USDA raised wheat production estimates by 15 million bushels to 2.058 billion, despite, “Flooding and persistent wet soils have delayed planting in North Dakota and Montana well beyond the normal planting window.”  Wheat use was unchanged, and ending stocks were dropped by 15 million bushels to 687 million.  Still, USDA raised the estimated price of wheat to a record of $7 to $8.40 per bushel.  Global supplies were shaved due to lower global production.  Nevertheless world production is forecast to be the third highest on record.

Late planting reduced the average yield for corn and river flooding reduced the potential acreage, but USDA’s 13.2 billion bushel forecast would be a record high.  But demand will surpass that, pushing the carryover for the new crop below 700 million bushels.  USDA does not think the soybean crop will be hurt because of sufficient planting time, and projects a 3.2 billion bushel crop, with a small increase in the carryover.