The August Supply/Demand report is the first report of the crop year to use farmer survey data in the production estimates. While it is still somewhat early in the year and USDA will continue to collect data and refine the estimates, this is the best data we have currently, and the August reports can certainly be a market mover.
Even though we have known for some time that the Texas cotton crop was in very bad shape and both dry land and irrigated cotton was being abandoned, the severity with which USDA slashed the cotton production estimate caught the market off guard. The 2022 cotton crop was pegged at only 12.57 million bales. Pre-report estimates had pegged the crop at between 14 and 15.75 million bales. Harvested acreage was reduced from 8.55 million acres to just 7.13 million, and lowered the projected yield to 846 lbs per acre, down from 870 lbs. It raised the projected on-farm average price to 97 cents per pound, up 2 cents from the previous report. The big news from the supply/demand report came from the 22/23 ending stocks estimate, which was cut to only 1.8 million bales. That carryout implies a stocks-to-use ration of 12.6%, which, if realized, would be the lowest in 98 years. Futures have gapped higher two days in a row, with December in position to test resistance at $1.20. However, the market is technically overbought and we could see the market turn lower and quickly fill the gaps.
The rice crop continues to be in pretty good shape considering the extreme heat and drought experienced this summer throughout the mid-south. USDA pegged the average yield up 66 lbs from the previous report at 7,627 lbs per acre, for a total production of 176 million hundredweight. That is a 1.5 million cwt increase over the previous projection. That carried over into the supply/demand forecast, and more than offset a decrease in the beginning stocks estimate. Exports were unchanged, and projected ending stocks were raised to 36.5 million cwt, up 1 million from the previous report, but down 12% from the previous year. The global supply estimate was lowered 4.1 million metric tons to 697.3 million. USDA also raised the projected on-farm price a whopping 60 cents to $18.80 per cwt, the highest forecasted price on record.
The corn crop is in poor condition across many parts of the U.S., and recent rains came too late to improve yields. In the August report, USDA cut their corn yield projection to 175.4 bushels per acre, down from an estimate 177 bushels in the previous report. Total production is pegged at 14.359 billion bushels, down from last month and slightly below the average trade guess. The old-crop carryout was raised to 1.53 billion bushels, up 20 million bushels from the previous report. December futures are in a mostly sideways trading pattern, with resistance in the $6.40 area.
The late planting season has benefited soybeans, as recent rains have helped boost the yield potential of the crop. USDA has pegged production at 4.53 billion bushels, up 26 million bushels on a higher yield estimate of 51.9 bushels per acre. That more than offset a decrease the harvested acres estimate, which was down 300,000 from last month’s report at 87.2 million bushels. Higher beginning stocks and production were partially offset by a 20 million bushel increase in the export projection. 22/23 ending stocks are forecast to be 245 million bushels, up 15 million from the previous estimate. The average on-farm price was lowered 5 cents from the previous report and is now forecast to be $14.35.
Livestock, Poultry and Dairy
USDA raised their red meat and poultry production estimate from last month as lower pork and turkey production estimates were offset by higher beef and broiler forecasts. Higher expected slaughter rates for the second half of the year let to an increase in the beef production estimate. The cash price estimate for steers in 2022 was raised to $142.10/cwt. The average cash price estimate for barrows and gilts was raised to $73.80/cwt, while the estimates for broilers was lowered to $1.46/lb.
The milk production forecasts for both 2022 and 2023 were raised from last month on both a larger cow inventory and higher milk-per-cow forecasts. Forecasts for 2022 butter prices were raised from last month on current price strength, but the 2022 cheese price was lowered on larger supplies and continued large stocks. The Class III price was lowered on both lower cheese and whey prices, and the Class IV price was lowered as the higher butter price was offset by the lower nonfat dry milk price. The all milk price for 2022 was lowered to $25.20/cwt.
October Live cattle peaked last week at $146.25. They have since seen a gradual decline trading as low as $134.80. This downward shift in futures pricing has much to do with drought-stricken cattle hitting feedlots earlier than usual and at lower weight. Rising feedlot inventory contributes to downward price movements, this year’s July feed yard placements were 2% above last year’s with much of that push coming from cattle under 700 lbs.
October Feeder Cattle have reflected the same pricing decreases seen by the live cattle contract, dropping from $190.25 to $184.37 ½. Market saturation seems to be driving down the feeder cattle numbers as many cattlemen prepare for tight hay supplies and higher feed prices this winter.
Boxed Beef Cutout averages for the week ending August 19 were $264.58 for choice animals and $238.43 for select animals. These numbers are down $74.34 and $72.58 respectively from the same week last year.