A rebound in overseas crop production, drop in cotton exports and an increase in wheat and corn stocks led to a mixed day for commodities on the heels of Wednesday's USDA Supply/Demand report.
"In general terms, the USDA supply/demand report was considered bullish for soybeans and rice, but not for cotton, corn, and wheat," said Scott Stiles, extension economist for the University of Arkansas Division of Agriculture. "The futures markets are in agreement with that assessment this morning."
There were many factors at work to bring about the higher-than-expected cotton, corn, and wheat ending stocks.
"Most of the increase for wheat and corn came from adopting the September quarterly stocks estimates," he said. "Doing so increases the 'beginning stocks' category and flows through to total supply."
Stiles said there were plenty of reductions in exports:
Exports were cut for corn by 50 million bushels and feed use and exports were also cut for wheat.
Exports were also cut 500,000 bales for cotton, while Chinese cotton imports were reduced by the same amount.
Soybeans and rice exports were reduced as well, but lower production for soybeans and rice made up for the lost demand.
"Bottom line, there is just a rebound this year in foreign production and more competition," he said.
Looking ahead, Stiles said prices are looking favorable for rice and he expected corn and soybeans to compete for acreage next spring. Corn prices are at historic highs, he said, and even though the forecast ending stock number was up from last month, the ending stocks were still significantly lower than at the end of last year.
The picture for cotton is a little less clear with cotton inventories expected to rebuild.
"Cotton may lose some acres in 2012 or just remain flat," he said. "Cotton is still profitable, but prices have pulled back to reflect more comfort with the rebuilding supply situation."
USDA's forecast rolled back forecast yields for Arkansas cotton from 1,018 pounds per acre last month to 996 pounds this month
"The best yields have been picked already," Stiles said. "In all likelihood, it will fall off from here. The later planted cotton yields are coming down."