USDA Releases September Crop Production and World Supply and Demand Estimates (WASDE)

The U.S. wheat situation was unchanged from August, and calls for wheat stocks to rise from 306 million bushels at the beginning of the 2008 marketing year to 574 million bushels at the end (June 1, 2009). U.S. wheat exports are projected to be 1 billion bushels, down from 1,264 million bushels last season. Some market analysts might have expected USDA to increase its projection for exports, considering the fevered pace of U.S. wheat exports to date. Global Insight expects wheat exports to slow dramatically in the second half and basically hit USDA's projected level. The potential for upside is likely tied to Canada's ability to get its crop out of the field with a better than average share grading high quality. At present, Canada is falling behind in its harvest progress, and needs some hot, clear weather to catch up. USDA has a projected wheat farm price of between $6.70 and $7.80 per bushel, compared with $6.48 in 2007. Global Insight projects the 2008/09 wheat price to average $7.23 per bushel.

Outside the United States, the record world crop continues to increase in size. USDA projects a 676 million metric ton (mmt) harvest for the world, up 5.5 mmt from last month. The largest increases occurred in the EU-27, Russia, and Ukraine, with much of this being feed-wheat quality. Production and exports for Canada were increased, as the quality of its crop looks to be better than average at this stage of harvest.

The U.S. feed grain production estimate for 2008 was reduced due to lower expected corn yields, down 2.7 bushels per acre from the August estimate. USDA put the U.S. corn crop at 12.1 billion bushels compared with 12.3 billion in August and 13.1 billion in 2007. Overall, the August weather throughout the Midwest was cooler than average, with below-normal precipitation.

The lower production estimate was partially offset by lower expected feed demand, and the resulting stocks estimate dropped by about 100 million bushels to 1 billion. Ending stocks for corn in the 2007 crop year are estimated to be about 1.6 billion bushels. Tighter stock led to an increase in the projected corn price for 2008 of $5.00 to $6.00 per bushel, up from $4.20 per bushel in the 2007 market year. USDA's export, food, and industrial demand estimates remained constant from last month. Ethanol demand is expected to increase from 3.0 billion to 4.1 billion bushels, while food demand will remand flat between the two seasons. U.S. corn exports are expected to drop from 2.4 billion bushels to 2.0 billion bushels. Lower U.S. corn exports are the result of increased competition for feed wheat as well as increased barley supplies internationally.

Soybean stocks in the United States are projected to be 135 million bushels by the conclusion of the 2008 season, basically the same as last month's estimate and flat with 2007 ending stocks. USDA lowered its soybean production estimate from 2.97 billion bushels to 2.94 billion due to a 0.5 bushel per acre cut in its yield estimate. A 30 million bushel reduction in expected 2008 soybean crush offsets the drop in production, keeping the stock estimate flat. USDA projects U.S. farm level soybean prices to average $11.60–12.80 per bushel. Global Insight's recent forecast calls for an average price of $12.78 and stocks being basically flat at 140 million bushels.

Global soybean production is projected to reach a record 238 mmt, up 9% from 2007. Increased soybean production is expected in Argentina and China while larger rapeseed crops are projected for the EU-27, Canada, and Belarus. Global oilseed stocks are projected to increase 3 mmt to 60.4 mmt.

U.S. rice production and stocks were both increased by 2 million hundred weight due to a 40,000 acre increase in planted and harvested area. The 2008 rice yield was lowered from 7,116 pounds per acre to 7,076 pound. Rice is the crop potentially most affected by Hurricane Gustav, but the September estimate does not account for any impact of the adverse weather. USDA projects average farm level rice prices to be $15.75 to $16.75 per hundred weight, up from $12.80 in 2007. Global Insight's recent forecast included $14.70 for the projected 2008 rice price and a 60,000-acre increase in planted acreage from the 2008 level. If rice prices are closer to USDA's estimate, we can expect more upside to 2009 acreage than our forecast implies.

USDA made several adjustments to the supply and demand situation for cotton in both the 2007 and 2008 seasons. For the 2007 season, USDA reduced exports from 13.9 million bales to 13.65 million and decreased its estimate of ending stocks from 10.2 million bales to 9.9 million. The uncounted category increased to 0.55 million bales to create the balance for 2007. The 2008 balance sheet was adjusted for lower beginning stock level and lower expected exports, resulting in an increase in ending stocks of 0.3 million bales to 4.9 million bales. Planted acreage for all cotton was increased from 9.25 million acres to 9.41 million acres, while the harvested area estimate was reduced by 20,000 acres and yield were increased 7 pounds per acre. The result of these changes was an increase in 2008 cotton production to 13.85 million bales, up from 13.77 million bales last month. USDA lowered its expectation for the average cotton price by 3 cents per pound on both the high and low ends of its range, bringing it to 57–69 cents per pound.