Source: MEATINGPLACE, 1/12/12

Corn futures plunged their 40-cent limit on the Chicago Board of Trade and soybean futures fell sharply Thursday after USDA projected much larger crops than the market expected, helping ease fears of further food price inflation.

USDA’s estimates for corn and soybean production and ending stocks all exceeded analyst forecasts, implying lower feed costs for protein producers, noted Deutsche Bank analyst Christina McGlone.

The reports points to higher hog production, but a still-tight corn stocks-to-use ratio should limit poultry production given weak balance sheets in that sector, McGlone said in a note to clients.

Shares of Sanderson Farms, Pilgrim’s Pride and Tyson Foods all rose after the report was released, with Sanderson stock up 7.47 percent at $50.95, Pilgrim’s up 6.17 percent at $5.88 and Tyson up 1 percent at $19.94 in midday trading.

USDA now expects U.S. corn production of 12.358 billion bushels and ending stocks of 846 million bushels, the agency said in its December World Agricultural Supply and Demand Estimates report.
That compares with analysts’ consensus forecast for corn production of 12.28 billion and ending stocks of 753 million, according to Deutsche Bank.

USDA projected soybean production of 3.056 billion bushels and ending stocks of 275 million bushels. That compares to analysts’ average estimates for production of 3.042 bushels and ending stocks of 227 million bushels, Deutsche Bank said.

USDA raised its forecast for pork production in 2012 but left poultry production forecasts unchanged while beef production was little changed.

Also Thursday, the United Nations Food and Agriculture Organization said its global food price index declined in December, dropping 11.3 percent below its February 2011 peak, led by sharp falls in the international prices of cereals, sugar and oils.

To read the full USDA WASDE report, click here.

For more on the UN report, click here. 

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