“The projection of a very modest increase in corn used for ethanol and a return to more normal (larger) exports is also consistent with our expectations.  

“The USDA projects a sharp increase in feed and residual use of corn, to a six-year high of 5.4 billion bushels. The projection assumes an increase in livestock production, a more favorable wheat-to-corn price ratio and an increase in residual (unexplained) use of corn due to the large crop size.

“The forecast exceeds our expectation. Even with that large forecast, year-ending stocks as a percentage of consumption are projected at a 7-year high of 16.7 percent.

“The marketing-year average farm price is projected at $4.80, down from the $7.20 average expected for the current year. The projection of $4.80 includes the expectation of substantial pre-harvest sales at much higher prices,” Good said.  

For soybeans, the USDA projects planted and harvested acreage to increase by a very modest 300,000 and 500,000 acres, respectively.

“Based on a model similar to the one used for corn, the U.S. average yield is projected at 44.5 bushels per acre, resulting in a crop of 3.405 billion bushels. That would be 390 million bushels larger than the 2012 crop and 46 million bushels larger than the record crop of 2009.

“Using a longer time period and a different weather model, our expectation would be for an average yield of 43.8 bushels and a crop near 3.355 billion bushels,” he said.
Like corn, consumption of U.S. soybeans is expected to increase during the 2013-14 marketing year, even with increased competition in the world market from the much larger South American crop currently being harvested.  

“Larger consumption would stem from lower prices and continued strong soybean demand from China,” Good said.

“The weakest demand segment is expected to be soybean oil exports, resulting from continued high prices and from increased competition from South American soybean oil and from palm oil. That weakness is expected to be partially offset by an increase in domestic soybean oil consumption for biodiesel production.

“The 300-million-pound (6 percent) increase projected for that category, however, seems modest in light of the advanced biofuels mandate and the reinstatement of the biodiesel tax credit,” he said.

Year-ending stocks of U.S. soybeans are projected to increase from 125 million bushels this year to 250 million bushels next year. The average farm price is expected to decline from $14.30 per bushel to $10.50.

Good said the early USDA projections for the 2013-14 marketing year are well reasoned and represent a useful starting point.

“Our projections differ only slightly,” he said.

“Larger year-ending stocks and a marketing-year average price near $4.50 for corn may result from a crop of 14.5 billion bushels. Producers appear to have been reluctant to take advantage of the high pre-harvest prices available early in the year.

“In contrast, our expectations would be for a slightly smaller soybean crop, stronger domestic soybean oil demand, and a marketing-year average farm price of soybeans near $11.00,” he said.

(You can see the entire USDA report at USDA releases 2013/14 outlook for grains, oilseeds).