US Corn Crop Estimate Cut 17% With Yields Forecast To Drop To 17 Year Lows

Tyler Durden's picture

Corn was already surging to new record highs before the USDA released the WASDE report this morning. With a consensus view of 10.929 billion bushels (compared to USDA's prior 2012 estimates of 12.97 billion), the USDA's 10.779 billion bushel forecast means a 17% slashing in harvest expectations. Crop conditions were the worst since 1988 with 69% of the Midwest in drought. Soybeans likewise were expected to show a 2.796 billion bushel production forecast (based on Bloomberg's survey) which compares with the 3.05 billion prior forecast from USDA and just came 4% below expectations. Bloomberg notes: "The U.S. drought means that global corn supplies will be critically tight for the next year; Livestock and milk-product prices will have to rise to cover the increased feed costs. Eventually, global consumers will have to pay the bill." It appears the algos were at play immediately after the report as prices surged (in corn) to $8.49 before falling rapidly back to $8.19, and are now up fractionally at $8.31. The biggest consequence is a heavier drag on any possibility of a sizable Chinese stimulus as food price inflation, as we noted last night, is set to stymie any flood of money. Wheat is down, Corn up a little, Soy up more.




U.S. feed grain supplies for 2012/13 are projected sharply lower again this month with corn production forecast 2.2 billion bushels lower and sorghum production forecast 92 million bushels lower. The forecast U.S. corn yield is reduced 22.6 bushels per acre to 123.4 bushels as extreme heat and dryness continued, and in many areas worsened, during July across the Plains and Corn Belt. As forecast, the 2012/13 corn yield would be the lowest since 1995/96." U.S. corn production for 2012/13 is forecast at 10.8 billion bushels, the lowest since 2006/07. Relatively small increases in carryin and imports only partly offset this month’s substantial reduction in crop size. Ending stocks for 2011/12 are projected 118 million bushels higher with lower expected exports, reduced corn use for ethanol, and a small increase in imports. Imports for 2012/13 are also raised, up 45 million bushels to 75 million, reflecting strong domestic corn prices and competitively priced foreign supplies. Total U.S. corn supplies for 2012/13 are projected down 2.0 billion bushels and at a 9-year low.


This month’s large reduction in U.S. corn supplies and the sharply higher price outlook are expected to further reduce 2012/13 corn usage. Total use is projected 1.5 billion bushels lower and at 11.2 billion would be a 6-year low. The biggest reduction again this month is for feed and residual disappearance, projected down 725 million bushels. Food, seed, and industrial (FSI) use is also projected lower, down 470 million bushels, mostly reflecting a 400-million-bushel reduction in corn used to produce ethanol. Reductions in other food and industrial uses account for the remainder of the FSI decline. Ending stocks for 2012/13 are projected at 650 million bushels, 533 million lower and the smallest carryout since 1995/96. The 2012/13 season-average farm price for corn is projected at a record $7.50 to $8.90 per bushel, up sharply from the $5.40 to $6.40 per bushel projected in July. Projected farm prices for the other feed grains are also raised.


The 2012/13 season-average farm price for corn is projected at a record $7.50 to $8.90 per bushel, up sharply from the $5.40 to $6.40 per bushel projected in July.

Perhaps even more importantly, Soybean looks set to make new records, which means no mas from PBOC:

production for 2012/13 is projected at 2.7 billion bushels, down 358
million due to lower harvested area and yields.
Harvested area is
projected at 74.6 million acres, down 0.7 million from the July
projection. The first survey-based soybean yield forecast of 36.1
bushels per acre is 4.4 bushels below last month’s projection and 5.4
bushels below last year’s yield. Soybean supplies for 2012/13 are
projected 12 percent below last month to a 9-year low on lower
production and reduced beginning stocks. Soybean exports are reduced 260
million bushels to 1.11 billion bushels. Soybean crush is also reduced
as higher prices reduce domestic use and prospective exports for both
soybean meal and oil. Soybean ending stocks are projected at 115 million
bushels, down 15 million.


U.S. changes for 2011/12 include increased soybean crush and
exports and reduced ending stocks. Crush is increased 15 million bushels
to 1.69 billion reflecting increased exports and domestic use of
soybean meal. Soybean exports are increased 10 million to 1.35 billion
bushels reflecting strong shipments in recent weeks. Soybean ending
stocks are projected at 145 million bushels, down 25 million.


Soybean and product prices for 2012/13 are all raised to record
levels this month
, reflecting the impact of sharply reduced soybean and
corn production. The U.S. season-average soybean price is projected at
$15.00 to $17.00 per bushel, up $2.00 on both ends
. Soybean meal prices
are projected at $460 to $490 per short ton compared with $365 to $395
last month.  Soybean oil prices are projected at 53 to 57 cents per pound, up 0.5 cents on both ends.

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Debtonation's picture

The market has been cornered

LongSoupLine's picture

Ok, that was just flat out dry and corny..

Meesohaawnee's picture

kornhulio.. where art thou..ok.. ill do it for ya. BULLISH!

francis_sawyer's picture

Print more corn NOW!

Rusticus's picture

The Treasury to print on rice paper and increase the value of a dollar.

rwe2late's picture

 That would certainly work.

They could print enough to create a rice shortage and  drive up the price if rice.

John Law Lives's picture

Uncle Sam's mandating the use of corn-based ethanol as a fuel source was one of the WORST ideas ever re. energy consumption.  It needs to have the kibosh put on it.

100% FUBAR.

DeadFred's picture

Ethanol producers are have big political contributions on their side.

You notice the wheat report wasn't so bad so I suggest we have all the starving people eat cake instead.

LongSoupLine's picture

yep, our kids for years were required to read "grapes of wrath" in school...shit, now they can live it.

post turtle saver's picture

"The promotion of, Federal subsidy for, and high import tariffs protecting domestic production of ethanol motor fuel and the Federal mandate for oxygenated gasoline are essentially political phenomena. The principal driver in promoting E85 is the North American auto industry's need to avoid CAFE fines; in the fuel alcohol industry as a whole lobbying by American corn producers and agribusiness, in particular Archer Daniels Midland, the biggest ethanol producer in the United States, has done much to get the fuel alcohol industry its present subsidized and protected status. Advocates for wheat, corn and sugar growers have succeeded in their attempts to lobby for regulatory intervention encouraging adoption of ethanol[3], stimulating debate over who the major beneficiaries of increased use of ethanol would be. Some researchers have warned that ethanol produced from agricultural feedstocks will cause a global food shortage[4], contributing to starvation in the third world."

roadhazard's picture

39% of all corn in the US has been going to fuck up carborators and raise grocery prices. I am so proud of my country.

Cursive's picture

But Monsanto has draught-resistant GMO seeds.  How can this drop in yields happen when so many benevolent corporations and their governmental helpers are focused on the problem?

Jason T's picture

el paso to hell es paved with good intentions.  

GMadScientist's picture

No, there's blacktop straight through to Juarez.

Biosci's picture

But of course! Four billion bushels were created or saved by Monsanto stimulus.

johnnyyuma's picture

Whisper the M word at your peril. Can Government and monster corporations affect weather? Listen to the trailer and wonder if a drought can be produced>

China's picture

Guess I need to start working on the ol green house earlier than I thought this year.

Meesohaawnee's picture

thats why DTO is soaring.. less tractors running. has nothing to do with manipulation. we dont do that here. just in china

slaughterer's picture

Corn will be limit down before you know it. 


Lohn Jocke's picture

Basis is through the floor... exports not including mexico are net negative...who is buying? Naive paper traders on the coasts who don't know the mechanics of grain.

Grainium's picture

Are you kidding?  Basis through the floor????!!!  Decatur is paying +33U for Aug dleivery, +24Z for Sep delivery, +20V for Oct dleivery, and +15h for Jan delivery.... DECATUR!

CIF corn is +42U!!!!!

Where is the basis "through the floor"???

Sitting here on the CBOT floor... don't feel al that naive after 18 years...

11/12 soy carryout will be 115 milbus.... less than 1 months crush

11/12 corn carryout will be 650 milbus... IS THIS BEARISH???!!!!


You need a cup of coffee and maybe a few more hours worth of sleep..

Lohn Jocke's picture

Where have you been all summer? ADM Decatur (and end user with vest processing) was trading a dollar over three weeks ago. Cif Corn peaked at a dollar over the July. It has dropped 50-60 cents in a week and a half.

take the 42 cu with an 8.5 foot draft in a barge you're barely getting +9 Fob on the Ohio River, even less on the illinois. With this inverse commercials want to buy EVEN LESS than end users because we'll end up sitting on it and getting out ass kicked.

Get out of your Ivory tower in chicago and take a look around the grain belt. Congratulations you move paper. I move grain. Nobody wants to pay at these levels until they have to.

Grainium's picture

Relax the tone dude,  Zerohedge has made you angry.  

No question that basis has backed off, but it is by no means "through the floor".  +15h for Jan delivery in on Aug 10th is not anyones definition of bearish.

Exports will pick up.. mark my words.  Egypt hasn't bought wheat in 3 months, China is living on borrowed time as the draw down their reserves.. and Japan, where's Japan?  

Demand destruction is not a light switch, a one off event that once it has been achieved solves all problems.  It is a phenomenon that must CONTINUE to occur in order to ration.  A break will only restore positive margins for ethanol guys like you, feed, and exports..



Lohn Jocke's picture

Apologies for coming off brash. Good discussion, but an export trader like myself in the field, I'm seeing no movement, firsthand. We can gauge the export market well, but we're not going to see easy demand destruction from China etc. It's going to be the feed market which sees the largest collapse and that's already happening. Farmers with cattle can't afford to feed them this Hay and Corn products at these prices, and the liquidation lowering nearby premiums makes it a self fulfilling prophecy.

Grainium's picture

No worries, I got a bit foamy at the mouth there for a minute too.  It's been a strange year.  I've been mostly playing around with meal spreads. Inverses wil be a feature for a long time coming.  Check out the drawdown in bean oil stocks for an interesting time.  The back end of demand destruction in beans is an oil market as we crush for meal.  ZF oil at -24 yields 3%!


The Proletariat's picture

Furthermore, many cattlemen in my area lost their BLM or Forest Service leases due to the drought; .gov told them cattle would stress the land too much in these conditions....

Grainium's picture


11/12 corn carryout will be 1.021

12/13 corn caryout will be 650 milbus

11/12 bean carryout will be 145... 1 months crush

12/13 bean carry will be 115.. less than 1 month


Lohn Jocke's picture

I'm trading my bean position far different from my corn position. Late rains, underestimated plantings, a massive inverse and South Americans licking their lips as these prices. Some timely bullspreads have been worth their weight in gold.

post turtle saver's picture

Interesting, I also would expect Brazil and Argentina to be all over this re: soybeans.

Corn is a different matter altogether, USA is King Corn and when we sneeze the world catches cold.

Lohn Jocke's picture

Oh they are, Farmer sales for the new crop are well above what they usually are and they will try to plant on every square foot of arable land. But because their crop doesn't hit the market until Feb/March you can put on a spread between November beans (U.S. crop) and Merch beans (s. Am) and make a killing.

Grainium's picture

The most bullish thing i have ever seen in 18 years of ag futures trading...

Lohn Jocke's picture

Did you miss the demand destruction? You were probably one of the goons who bought CZ up 25 this morning. Where are ya now?

Buy Beef...But the hell out of it.

Grainium's picture

What demand destruction?  Ethanol margins are STILL POSITVE?  not convinced?  Look at the price of ethanol vs RBOB.   Hog and poultry feed margins are negative, but so are sales margins...can't make money selling the meat either!

Demand destruction is taking place ... but we are not yet there...

Black sea area weather is compounding our domestic shortage BTW...  How much do you think Ukraine will export this year? 

Lohn Jocke's picture

Still positive? they've been barely breaking even all year and in the red much of the time. I know because I trade physical corn with ethanol plants. I agree that livestocks are very bearish right now, You you can't grow a herd of cattle overnight. Stop buying corn and beans near the high and keep your eyes peeled for the floor on cattle, because once they're slaughtered they aint coming back cheap.

I don't worry about Ukranian corn, but exports traders estimate Brazil is on course to double exports from previous year and Argentine is up 33%

Grainium's picture

A with you in the meat trade, already involved.  I just don't believe that the story is over in grains.  Beans in particular are astonishingly bullish! 

As far as Arg/Braz are concerned,  as you no doubt are already aware, there is alot of weather ahead of us, even is spite of the assumption that El Nino will break the drought pattern.  I'll count that crop when its in the bin




GMadScientist's picture

"The biggest consequence is a heavier drag on any possibility of a sizable Chinese stimulus as food price inflation"

No, the biggest consequence will be potential megadeaths from starvation in the 3rd world.

Nothing like a good old supply shock to ignite all the inflationary swamp gas Ben has pumped into the room.

Whoa Dammit's picture


Also look for political instablity as a consequence. Hungy bellies that are told to eat cake tend to become revolutionaries...

"It was during Louis XVI's reign, that the French populace began its fight against an unmanageable national debt and an indiscriminate inequitable system of taxation. France was in financial crisis because of its participation in the Seven Years War and the American Revolution. Although France had a parliament in place, it was the king's inability to rein in the power and prerogatives of the nobility and the clergy, along with his own exorbitant expenditures. Compounded with a large number of unemployment ratio, the middle and lower class citizens wanted a way out.

Food scarcity was at the center of the French revolution. Crop failure, harsh winters and famine led to high prices of bread, which was the main source of nutrition for poor peasants and an increased death toll. The government's failure to help its citizens while enjoying privileges by the way of increased taxes angered many peasants. This anger fueled their need to overpower and get rid of social inequity and put an end to the food shortage. Economic and agricultural problems, combined, evolved into a central cause of the French Revolution. Louis XVI failed to improve the financial situation and did not take kindly to ministers who wanted to bring in financial reforms. The government went bankrupt by 1789."

blunderdog's picture

In practice, it takes YEARS for people to starve to death.

It's only a very unusual set of circumstances that would cut "adequately-fed" people to zero calories overnight.

SheepDog-One's picture

Dammmmnnn wheres Beeks with that crop report!

LawsofPhysics's picture

Ahhh  sweetness.  Soybeans China? I accept gold and silver.


FYI- a glut of beef coming, start buying the shit out of it.

Floordawg's picture

For those hardcore carnivores looking to fill their freezers, keep your eye on prices and expect them to start dropping early next month.

DOT's picture

I prefer the grass fed beef, but I see a good opportunity for some pork accumulation.

Maybe some chicken too.


Beans look good today!

Fantasy Planet's picture

Good time to be lactose intolerant.

Yellowhoard's picture

I think it was Kissinger who commented once on what a super awesome weapon food is.