Still, grain futures were lower following bearish surprises in the wheat complex. At this time grain market participants are focusing on upcoming USDA early estimates of the 2012/13 US crop. These are not official estimates but are presented each year in the USDA annual outlook meeting. The expectation is for big increases in US corn acres and a notable improvement in US corn ending stocks. However, in the short term, the corn market remains concerned about the extent of current crop supplies and the possibility of another surprise when the March corn stocks data is released.

On the protein front, USDA made some adjustments to its estimates for beef, pork and poultry supplies. Beef production was increased by 150 million pounds but still it is expected to be about 1.1 billion pounds (-4,1%) smaller than the previous year. A somewhat slow start for exports in January likely caused USDA analysts to pull back the export outlook by about 10 million pounds. It is a relatively minor adjustment and one that may be reversed in the next update. The latest weekly export data showed robust exports to a number of markets and the expectation is that US beef exports should continued to benefit from limited supplies in world beef markets as well as from a lower valued dollar now that risk taking appears to be returning.

Imports were left unchanged at 2.090 billion pounds, about 1.9% higher than the previous year. While we agree that imports will be relatively low compared to the levels in 2008-08 (see chart), it is likely that US beef imports in 2012 may post a larger increase than USDA currently estimates. Strong prices for US lean cow meat and the expectation that prices could further escalate in the spring and summer will likely make the US market more competitive and bring more product into the US. Do not expect a big turnaround in imports, however, as key supplying countries (Australia, Canada, New Zealand) appear to be in herd rebuilding mode and so far appear to have plenty of grass and little incentive to sell.

US pork production in 2012 is currently forecast at 23.254 billion pounds, about 475 million pounds or 2.1% higher than a year ago. The forecast for higher pork supplies rests on expectations for modest increases in the pig crop and higher hog carcass weights. Pork exports remain a point of debate in the trade and USDA currently expects them to hold about steady with 2011 at 5.11 billion pounds.