Source:  Rita Jane Gabbett, MEATINGPLACE.COM, 11/9/10

USDA reduced its corn production estimate by 1 percent from a month ago to 12.5 billion bushels, down 4 percent from last year’s record crop, pushing the average corn price forecast up by 20 cents to range of $4.80 to $5.60 for the marketing year that began Sept. 1.

USDA dropped its corn ending stocks forecast to 827 million bushels, below market analysts’ consensus forecast of 840 million bushel. The report also put the stocks-to-use ratio to a tight 6.2 percent compared to the historical ratio of 15 percent.

Corn futures prices on the Chicago Board of Trade rose to over $6.00 per bushel for May 2011 delivery after the report was released.    

Soybeans
USDA also dropped its soybean production forecast by 1 percent to 3.38 billion bushels, which is still a record and up slightly from last year.

Soybean exports were raised by 50 million bushels to a record 1.57 billion due to increased global import demand and to a record sales pace, especially to China which accounts for over 70 percent of known U.S. soybean export sales through October.

Soybean ending stocks were projected at 185 million bushels, down 80 million from last month, putting the stocks–to-use ratio at a tight 5.5 percent compared to 10 percent historically.

The U.S. season-average soybean price range was projected at $10.70 to $12.20 per bushel, up 70 cents on both ends of the range. The soybean meal price is projected at $310 to $350 per short ton, up 20 dollars on both ends of the range.

Soybean futures prices on the Chicago Board of Trade rose to over $13.00 per bushel for November 2010 delivery in morning trade.

Implications for meat processors
“Given the likelihood of even greater increases in feed costs, combined with excess supply, we remain cautious on the chicken producers,” wrote BB&T Capital Markets analyst Heather Jones in a note to investors.

She pointed out that Tyson will benefit from internal cost savings initiatives, as well as robust pork and beef fundamentals, “so we are more positive on its shares relative to a pure-play such as Sanderson Farms.”

Jones said Smithfield has hedged its feed costs fairly well, which should provide some protection from escalating corn and soybean prices.

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