Market participants were anticipating further reductions in corn yields as well as a reduction in the number of acres expected to be harvested. USDA left harvested acres unchanged and only slightly reduced yields. The reduction in yields lowered anticipated production by about 50 million bushels, a reduction that was more than offset by a 160 million bushel increase in the old crop carryover stocks. Ending corn stocks are currently projected at a snug 733 million bushels but this is not as tight as the 650 million bushels projected last month. USDA currently estimates feed and residual use in 2012/13 to be down 6% from 2011/12 and 13% lower than in 2010/11.

The modest reductions in feed grain supplies did not necessitate any significant changes to estimates for beef, pork and poultry production. The charts to the right outline the progression in USDA forecasts for beef, pork and poultry production for 2012 and 2013. In the last two months, USDA has increased its estimates for US beef output in 2012, reflecting higher than expected cow slaughter but also recognizing the impact of heavier cattle coming to market. Steer and heifer weights have averaged about 2% over year ago levels YTD. USDA currently estimates beef production for 2012 to be 25.879 billion pounds. This is about 3.2% higher than the USDA forecast back in January (see chart) and only 1.6% lower than a year ago. Coming into this year, the expectation was for beef supplies to tighten up as producers held on to more cows. Drought conditions have limited herd rebuilding and caused a liquidation of the dairy cow herd.

USDA estimates of pork production for 2012 have been very consistent for much of the year and the latest estimate pegs total 2012 output at 23.224 billion pounds, just 0.1% higher than what it was forecast back in January and 2% larger than a year ago. The sharp rise in corn prices following the historic drought in the Midwest has dramatically altered the outlook for pork supplies in 2013 (see chart). Back in May, USDA forecast pork supplies for 2013 at 23.842 billion pounds. The September forecast, however, now estimates pork production next year at 22.922 billion pounds, an almost 4% reduction from the May estimate and 1.3% lower than the 2012 number. Pork production still is forecast above 2011 levels, however. Similarly, 2013 broiler production is currently forecast at 35.966 billion pounds, 3.1% lower than the May forecast and 1.1% lower than 2012 levels.