Source: John D. Anderson, Deputy Chief Economist, American Farm Bureau Federation
The January World Supply and Demand Estimates (WASDE) report from USDA includes what are essentially final production numbers for the current crop year. Last Friday’s report provided very little new information for the supply side of the corn market. Harvested acreage was revised down just enough to mostly offset an upward revision in yield. The final tally for 2012/13 corn: 97.2 million acres planted, 87.4 million acres harvested, 123.4 bushel national average yield resulting in total production of 10.78 billion bushels. Historically, that’s a sizable figure, but in the context of current corn demand, it is uncomfortably small – as the market has been making clear for several months now.
The real interest in last week’s report was on the demand side. Pre-report expectations were rather mixed, but on average, the trade expectation was for a small (20 million bushel) increase in carryover from last month’s estimate of 647 million bushels. What the market got was a 45 million bushel reduction in carryover; so an already-tight carryover figure looks tighter still after last week’s report. The primary source of that tighter carryover was a 300 million bushel increase in feed use compared with last month’s estimate. Incidentally, to accommodate that higher feed use estimate, export projections were dropped to just 950 million bushels – about 8.8% of production. If realized, this will be the lowest corn export figure since 1971/72 (when exports were 782 million bushels) and the lowest percent of production exported since way back in 1960/61.
The substantial upward revision in feed use suggests that meat industry contraction has not been as great as was expected in mid-to-late-summer as the magnitude of the drought was still being assessed. These feed numbers correspond to stabilizing, and even increasing, production figures in at least part of the meat sector. In fact, last month’s quarterly Hogs and Pigs report showed an essentially stable hog inventory. Likewise, recent broiler hatchery reports have shown increasing egg sets. Last week’s hatchery report showed that egg sets have been equal to or higher than year ago levels for each of the past six weeks. Meat production figures in Friday’s WASDE report are broadly consistent with these trends, calling for pork and broiler production to be about flat from 2012 to 2013 (a slight increase in pork production, a slight decrease in broiler production).