Editor's Note: This story was updated at 2:40 p.m. CDT Friday, Dec. 10, 2010.
Grain futures in Chicago fell Friday after the government unexpectedly raised its estimate for 2011 U.S. corn supplies amid higher imports and record production in Canada.
Corn stocks will total 832 million bushels at the end of the 2010/2011 marketing year Aug. 31, up 5 million bushels from a November estimate, the USDA said in its monthly Supply and Demand report today. Supplies were expected to be lowered to about 806 million bushels, based on the average analyst estimate.
Friday's report provided little bullish impetus for the grain markets, suggesting corn and soybean prices will continue declining the rest of the year from peaks reached in November, providing livestock producers opportunities to buy feed at lower costs, analysts said.
“It’s a mildly bearish report,” said Brian Hoops, senior market analyst with Midwest Market Solutions, Inc., in Yankton, S.D. “The market needs some bullish ammunition to continue moving higher, and we did not get that today. It’s going to be hard for any of these markets to rally”
March corn futures traded on CME Group in Chicago ended unchanged $5.74 a bushel, after dropping as much as 7 cents in early trading. The contract is down 7 percent from a recent high of $6.17 ¼ Nov. 9. January soybeans fell 8 ½ cents to $12.73 a bushel.
The USDA also raised its estimates for 2011 U.S. beef, chicken and pork production and lowered slightly its forecast for next year’s milk production, though analysts said there were few surprises for livestock and dairy markets. Cattle and hog futures in Chicago fell in early trading.
Higher corn stocks reflect increased U.S. imports, which the USDA said will total 15 million bushels in 2010-11, up 5 million bushels from a previous estimate. The USDA left its average farm price for corn unchanged at $4.80 to $5.60 per bushel.
While projected corn stocks are still expected to fall to a 15-year low, corn futures will need additional supply concerns to push prices higher over the near-term, and that likely won’t happen until the USDA releases its final numbers on the 2010 crop Jan. 12, Hoops said. “The soybean market is vulnerable to a pullback too,” he said.
In a Nov. 9 report, the USDA lowered estimated corn production to 12.54 billion bushels, down 4.3 percent from a record 13.11 billion bushels harvested in 2009. The smaller-than-expected harvest estimate sent corn futures to 26-month highs, before prices fell much of the past month.
Trade focus will now shift to the January crop report, “where odds favor further decline” in 2010 U.S. corn and soybean production, Rich Feltes, an analyst with R.J. O’Brien & Associates in Chicago, said in a report today.
Also, the potential for more speculator money flowing into commodities, along with an improving economy, may limit grain price downside, Feltes said. “We are not interested in chasing market here but do advise buying breaks,” he said.
U.S. beef production in 2011 is expected to total 25.64 billion pounds, up from a previous forecast of 25.55 billion pounds but down from 26.29 billion pounds this year, the USDA said.
The increase “largely reflects higher forecast placements of cattle during the fourth quarter of 2010 and early 2011,” the USDA said.
Average slaughter steer prices for 2011 were increased to $96 to $104 per hundred pounds from $96 to $103, with the USDA citing “continued strong demand for cattle.” Steers averaged $95.19 this year.
In pork, estimated 2011 production was increased to 22.59 billion pounds, up from a previous estimate for 22.58 billion pounds and also up from 22.35 billion pounds this year. The USDA lowered projected average hog prices in 2011 to $53 to $57 per hundred weight from $54 to $58, saying “pork supplies are large.”
The report “adds to the idea that cattle are putting in a top for the next 30 to 45 days,” Mike Zuzolo, president of Global Commodity Analytics & Consulting LLC, said in a report today. Cattle and hog markets probably will “continue to follow the outside markets very closely since retail prices are likely starting to bite into consumption at this time,” he said.
In trading Friday, February live cattle futures at CME Group fell 0.675 cent to $1.0395 a pound. February lean hogs fell 0.75 cent to 75.15 cents a pound. The CME hog contract reflects carcass values.
Milk production in 2011 will total 195.5 billion pounds, down from 195.6 billion pounds in a previous estimate but still a record. This year’s production was pegged at 192.8 billion pounds.