Corn production up slightly in USDA November report

(Farm and Ranch Guide) – Despite the drought of 2012, U.S. corn yields were increased in the November USDA Crop Production report.

The USDA estimated total corn production at 10.7 billion bushels, the lowest since 2006. The average yield, of 122.3 bushels per acre, was the lowest since 1995.

Production came in higher than trader expectations, said Brian Basting, a commodity research analyst with Advanced Trading. Basting spoke to media via the Minneapolis Grain Exchange monthly crop report call on Nov. 9.

“The actual crop was 10.725 billion bushels – nearly 100 million bushels above expectations,” he said. “The carryout was still at historically low levels, about 647 million bushels, and was 619 million bushels last month.”

The USDA has forecast record U.S. corn imports of 100 million bushels, as compared to imports of 28-29 million bushels in 2010 and 2011.

“Imports from Brazil are working their way up to the Southeast United States,” he said.

The U.S. is expected to use 4.15 billion bushels for feed, 4.5 billion bushels for ethanol and byproducts, and 1.15 billion bushels for exports.

“To see the U.S. corn export market as weak as it is today, you have to go back decades to see this type of weakness,” said Basting. “The soybean export market is very strong and probably has the potential to have a record first quarter.”

China does not expect to import more than 5 percent of its needs for commodity corn in 2012/13. The USDA estimates Chinese production at 200 million metric tons (7.874 billion bushels).

One of the biggest challenges for 2012/13 is getting U.S. corn to where it is needed.

Minnesota and North Dakota had better corn growing conditions than some other regions. Some buyers may have to bid on corn raised in the upper Midwest or Great Plains vs. their usual markets in Iowa, Illinois or Indiana.

Minnesota raised 1.386 billion bushels of corn, while North Dakota raised 406.8 million bushels.

Even with larger crops, the basis remained firm across the two states.

At one elevator in western Minnesota followed in this column, corn traded for about $7 with a basis of minus 38 cents in later October and early November. This cooperative uses unit trains, has access to ethanol plants, and the corn crop was large in the region.

Here’s how the minus 38 cent basis on Nov. 9, 2012 compared with other recent years – on Nov. 11, 2011, the basis was 27 cents under (price was $6.19); and on Nov. 13, 2010, the basis was 68 cents under (price was $4.85).

The USDA’s Nov. 9 World Agricultural Supply and Demand Estimate (WASDE) report estimated a season-average farm price for corn of $6.95 to $8.25 per bushel.

On the CME Group exchange, corn futures on Nov.9, 2012 traded with December corn at $7.405, March at $7.43, May at $7.395, July at $7.30 and September 2013 at $6.515 per bushel.

Compared with prices on October 26, December, March and May were unchanged, July was 3 cents lower and September was 7.5 cents lower.

“I would say the same thing about corn as with soybeans – through most of the 2011/12 crop year, the corn market showed a short crop, long tail,” he said, noting that in both 2011 and 2012 the market peaked around Labor Day. In 2011, the corn market trended sideways to June when the drought became apparent.

“There will be corn demand on a location by location basis – what local needs are and how that affects the local basis,” he said, “but the demand need is the greatest for beans.”

Corn traders have begun to study the U.S. livestock markets again for demand. They are looking for signs of contraction or expansion and how that would affect the corn markets.

The hog market recently offered some attractive prices for the summer of 2013 before backing off again.

“The combination of the declining corn price – at least with a couple weeks of data – maybe has slowed the liquidation thought in the producer’s mind,” Basting said. “It is going to have to play out in the next few months, but I think now the feed side is weak.

“You look at some of the cattle numbers on feed, and the availability of feeder supplies to put in feedlots is quite low. That is going to be the weaker side of the market.”

Corn prices have not been favorable for the milk or poultry sector.

“Maybe the market has to search out some lower (price) levels that will encourage the livestock and poultry producers to reconsider their long-term thoughts,” he said.

The market could attempt to move prices lower to find increased demand from livestock feeders.

“It certainly was not profitable (for livestock feeders) this spring and summer,” he said. “That’s a big factor why we did see signs of liquidation in hogs this summer and early this fall, and of course, lower cattle on feed numbers.”