USDA stuns market, lowers its 2013 corn crop estimate

Source: Written by CHRISTOPHER DOERING. Gannett Washington Bureau • Posted: Monday, January 13, 2014

WASHINGTON — The federal government unexpectedly cut the size of the country’s record 2013 corn crop as lower yields cut into supplies.

The U.S. Department of Agriculture on Friday trimmed last year’s corn crop to 13.925 billion bushels, down 64 million bushels from the estimate made a month earlier. The drop was a surprise to many analysts who expected the USDA to instead boost its estimate of corn output above 14 billion bushels.

The rebound in corn and soybean stocks, which were depleted during the 2012 drought, has been welcomed by food makers, livestock owners, renewable fuel producers and others who have seen their input costs decline. But as supplies have risen, farmers have felt the impact. Agricultural prices have dropped sharply, with corn the hardest hit commodity in 2013, down 40 percent.

In a separate report, the USDA said inventories of corn on hand Dec. 1, the first estimate since the harvest of the 2013 crop wrapped up, increased 30 percent to 10.426 billion compared with 8.032 billion bushels at the same time in 2012. That estimate also fell short of expectations due to smaller yields and greater demand for livestock feed.

In Iowa, the No. 1 corn-producing state, the USDA said corn stockpiles jumped 11 percent to 1.737 billion bushels.

“It’s not that the report didn’t show that we still have adequate to large supplies, it’s just that they’re not as large as we had anticipated going into the report,” said Don Roose, president of U.S. Commodities Inc. in West Des Moines. “The much expected lower prices (below $4 a bushel) that people continue to talk about are on hold here until we see the South American crop, until we see the U.S. crop.”

Corn futures spiked after the USDA released its data. March delivery for the crop rose 19¾cents Friday to $4.31¾ a bushel at the Chicago Board of Trade.

As Washington continues to debate the future of the country’s ethanol policy, the government reported that corn used to produce ethanol increased 50 million bushels to 5 billion bushels, up from 4.95 billion in December.

That’s evidence the drop in corn prices has made it cheaper to produce the fuel.

Bob Dinneen, president of the Renewable Fuels Association, said the large corn surplus shows there is enough of the crop available for ethanol, livestock feed and food production.

The Environmental Protection Agency, which oversees the country’s ethanol mandate, has proposed cutting the amount of renewable fuels that would need to be produced this year, a decision Dinneen said would hurt farmers and rural communities.

“Due to the expected corn surplus, corn prices have already dropped to nearly $4 a bushel — half the price of corn in late summer 2012 … and below the farmer’s cost of production,” Dinneen said. The EPA, he noted, is “on the brink of punishing” farmers if it moves forward with the proposed reduction.

The USDA said soybean stockpiles on Dec. 1 were 2.148 billion bushels, up 9 percent from a year earlier. Soybean inventories in Iowa were 339.798 million bushels, an increase of 1.7 million.

The government raised the estimate for U.S. soybean production for 2013 to 3.289 billion bushels, up from last month’s forecast of 3.258 billion. Soybeans for January delivery rose 8½ cents to $13.04¾ a bushel Friday following the report.