Latest Supply/Demand Estimate Reduces South American Soy Crop

USDA’s latest World Ag Supply and Demand Estimates shows reduced South American soybean competition and a record U.S. corn price forecast. USDA is still estimating 2011-2012 season average corn prices at a record six-dollars-20-cents a bushel. World Ag Outlook Board Chair Gerald Bange:

 “It’s up a little more than a dollar from the five-dollars-18-cents record that was recorded in 2010-2011. If you look at the crop right now and how much of the crop has been marketed, we think about 60-61% of the crop has been marketed at six-dollars, and that implies about six-dollars-55-cents for the rest of the year.”

USDA raised its estimate of Brazil corn production by one-million tons – but made no change for Argentina. Soybeans was a different story:

“For Argentina, Brazil and Paraguay combined, we actually went down about 6.4 million tons. In terms of bushels, that is roughly 235 million bushels, a very sharp decrease in terms of just one month.”  

But not enough to change the U.S. soybean export forecast – which Bange says would have dropped – if not for the decline in South American production. As for soybean prices: 

“We are looking at a soybean price now of twelve-dollars, that is up thirty cents from our previous forecast”, largely over concerns over South America. 

Meantime – USDA’s held its 2012 forecast of corn use for ethanol steady at around 5-billion bushels – 35 to 40-percent of the crop. But Bange admits lots of factors could impact ethanol demand – including the loss of the blender’s credit:

“The profitability of producing ethanol is simply not there. However, given the fact that the oil price has gone up to over one hundred-dollars per barrel now, there is certainly room in there to make money blending it. The problem is the so-called blending wall.” 

The blending wall limits ethanol’s marketability at a time when the credit’s gone – but fuel prices are up and export demand’s been strong. But Bange cautions – if gas prices get too high – that could add another wrinkle – stunting demand of gas – and therefore ethanol.