By Karl Setzer
The USDA bumped the U.S. corn yield by 1.7 bushels per acre in the September supply and demand report for a national average of 176.3 bushels per acre. Harvested acres increased 600,000 from August, and the combination of these factors was enough to give the United States a 15 billion bu (bbu) corn crop. Old crop demand was lowered by 70 million bu (mbu) which further increased the new crop corn supply. New crop corn demand increased 75 mbu, and the ending result is a new crop carryout estimate of 1.4 bbu, a 166 mbu increase from August.
The U.S. soybean yield was increased by 6/10ths of a bushel this month for a national average of 50.6 bushels per acre. Harvested acres were lowered by 300,000 for an end result of a 4.37 bbu crop. Old crop soybean demand was reduced by 15 mbu from a lower crush pace. Crush was also lowered by 25 mbu on new crop, but exports increased by 35 mbu. This gives the United States a new crop carryout estimate of 185 mbu, a 30 mbu increase from August.
Very few changes were made to the U.S. wheat balance sheets. Production was left unchanged from last month at 1.7 bbu. The USDA lowered wheat imports by 10 mbu and increased food demand by 2 mbu to put ending stocks at 615 mbu.
U.S. beef and pork production data for next year was also updated. Beef production for 2022 is expected to total 26.88 billion pounds, 870 million fewer than in 2021. Pork production this coming year is forecast at 28.15 billion pounds, a 410,000-million-pound year to year increase. An average steer value of $128.25 per hundredweight is projected for 2022. The average hog value for next year is $56.25 per hundredweight.
Now that the September WASDE report has been released, trade will turn its attention back to actual harvest data. The fact that projected ending stocks have started to creep higher is reducing some of the urgency in the market on buying and lowering the volume of risk premium that is needed. Stocks-to-use on corn is still tight at 9.5 percent but is right at the level where rationing is needed. Soybeans remain in a rationing position with a 4.2 percent stocks-to-use forecast. If yields point toward higher production figures, we will see rationing worries subside.
After an initial surge the United States has not seen as much corn demand from the global market as hoped. The only buyer of substance recently has been Mexico. This is generating ideas that U.S. corn values need to recede to generate additional demand, but this may not be the case. Most other corn suppliers in the global market are starting to deplete their reserves which will bring buyers to the United States by default. This will give the United States little competition in the global market for the next 3 to 4 months.
One corn supplier the United States is seeing competition from is Argentina. Corn production in Argentina was down this year but the country held over a large volume of old crop inventory it still needs to export. Even with these stocks, Argentina will likely be out of corn in the next few months, and until then, logistic issues are preventing large exports even with a corn surplus. These reasons are why several analysts feel the current 2.4 billion bu export forecast on U.S. corn this coming year is too low.
One point of pressure for corn in the global market is low quality wheat. There is a large amount of wheat in the global market that will not make milling quality this year and likely be used as a feed grain. This is especially the case with the EU crop where nearly two-thirds of the new crop bushels are not at milling quality. At the same time, this could push more buyers to the United States for high quality wheat.
We are starting to see a shift in weather focus in the United States. While weather is now a perpetual market factor, up to this point it has been mostly on corn and soybean development. Weather has also impacted the spring wheat crop, especially in the Pacific Northwest. We are now roughly a month away from the start of the winter wheat planting season in the Southern Plains, which will put emphasis on that region. While there is no concern at this time, as with corn and soybeans the United States has no room for losses in wheat yields.
U.S. net farm income for 2021 is expected to be considerably higher than last year. Economists are now predicting a net income of $113 billion this year, a large 19.5 percent increase from 2020. This would be the highest net farm income for the United States in the past 8 years. High commodity values are a leading reason for this increase, although government subsidies are also contributing. This increase is a sharp reversal form the 8 percent decrease in net income that was forecast earlier in the calendar year.
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