Monday, July 14, 2014
darrel-good-video-featured-09142012

Good on Grain: How Burdensome Are Corn Supplies?

AgFax.Com - Your Online Ag News Source


Corn prices have been declining for almost two years following the peak price generated by the very small U.S. crop in 2012. The recent sharp decline in prices has been associated with increasing prospects for a very large U.S. corn harvest again in 2014 following the record harvest of 2013. A second consecutive large crop would lead to a further build-up in stocks of corn by the end of the 2014-15 marketing year.

The important question is how burdensome are those stocks likely to be? The magnitude of year ending stocks will be determined by the size of old crop stocks on September 1, 2014, the actual size of the 2014 crop, and the strength of corn demand during the year ahead. The USDA’s WASDE report released on July 11 reflects current USDA expectations for the 2014-15 marketing year.

Stocks at the beginning of the marketing year are projected at 1.246 billion bushels, production is forecast at 13.86 billion bushels, consumption is forecast at 13.335 billion bushels, and year-ending stocks are projected at 1.801 billion bushels. Projections for all these categories will continue to change over the next several months.

 

The largest uncertainty about the magnitude of stocks at the beginning of the 2014-15 marketing year is the level of feed and residual use of corn this summer. To reach the revised USDA projection of 5.175 billion bushels for the year, use during the summer would need to total about 450 million bushels. That is well above the surprisingly low level of use the past two years, in line with use in the summers of 2010 and 2011, and well below the level of use prior to 2010.

The projection seems reasonable. Exports of corn are on track to meet the USDA projection of 1.9 billion bushels for the year, while ethanol use is running ahead of the projected pace. If weekly ethanol production during the last nine weeks of the marketing year remained at the level of the week ended July 4, corn used for ethanol production for the entire marketing year would exceed the most recent USDA projection by 35 million bushels. Stocks of old crop corn on September 1 may be slightly less than the USDA projection.

The bigger question is the likely size of the 2014 U.S. corn crop. The USDA projected yield of 165.3 bushels is based on a weather adjusted trend model that assumes normal July growing conditions. The first survey-based yield projection will be released on August 12. The market expects that yield forecast to be much larger. An average yield of 170 bushels would produce a crop of 14.25 billion bushels, about 390 million bushels larger than the USDA projection, if harvested acreage equals the current projection.

Current conditions point to a crop larger than projected by USDA, but projections of corn consumption also appear a little conservative. Feed and residual use of corn during the year ahead is expected to be only 25 million bushels more than during the current year. A large crop points to a continuation of a large “residual” use of corn and record livestock profit margins could generate at least a modest expansion in livestock production.

That expansion would have to be in the pork, poultry, or dairy sectors as the number of feeder cattle will remain limited. In addition, feed use of corn should be supported by the continuation of very high hog slaughter weights and by lower corn prices. Similarly, corn used for ethanol production could exceed the USDA projection of 5.05 billion bushels if ethanol exports continue to be supported by favorable ethanol prices relative to gasoline prices.

Corn export prospects are more difficult to gauge. The USDA projection for a 200 million bushel year-over-year decline in U.S. exports also appears a little conservative in light of foreign production prospects.

If stocks of corn at the beginning of the 2014-15 marketing year are 25 million bushels less than projected, the crop is 400 million bushels larger than projected, and consumption is 100 million bushels more than projected in the July 11 WASDE report, year ending stocks would total about 2.075 billion bushels. Those stocks would represent 15.4 percent of total consumption of U.S. corn and about 17.7 percent of domestic consumption.

The stocks-to-use ratios would be the largest since 2005-06 when ending stocks represented 17.5 percent of total consumption and 21.5 percent of domestic consumption of U.S. corn. The stocks-to-use ratios would be only slightly higher than the average for the 5-year period from 2005-06 through 2009-2010. Stocks during that period averaged 13.8 percent of total consumption and 16.7 percent of domestic consumption. That compares to the most recent 4-year averages of 8.3 percent and 9.4 percent, respectively.

So what price of corn is consistent with a more normal level of year ending stocks? The average price from 2006-07 through 2009-10 was $3.71. The average price of corn in 2005-06 was $2.00 per bushel, which was 83 percent of the average for the period from 1973-74 through 2005-06.

We have previously argued that the average price for the new era of prices that began in 2006-07 would be about $4.60, so that $2.00 in 2005-06 is equivalent to $3.82 in the current era. An average price in the year ahead near $3.75 would be consistent with similar supply-consumption scenarios of the recent past. It appears that the market has already priced in an average yield of at least 170 bushels.

Darrel Good

farmdocDaily

Tags: , , , , , , , , ,


Leave a Reply

Name and Email Address are required fields. Your email will not be published or shared with third parties.

Sunbelt Ag News

    U.S. Rice: Planting Decisions Stalled; Alternative Crops Considered1-30

    AgFax Cotton Review: Harvest a Mixed Bag for Texas Growers; India Sells Off Stockpiles1-30

    Rice Market World: Prices Low – But More Positives Than Negatvies1-30

    AgFax Grain Review: Neonics Use Critical; Soybean Prices to Drop, Corn May Rally1-30

    Peanuts: Bankrupt Texoma Sells Mississippi Buy, Dry Facility1-30

    Florida Peanuts: Done Right, Rotation Adds Thousands Of Pounds1-30

    Grain TV: Soybean Year-to-Date Exports Lower than 20141-30

    Cleveland on Cotton: World Consumption Increases; Will U.S. Sell Out?1-30

    Rose on Cotton: Demand is Hot; Anticipate a Pre-Plant Rally1-30

    Biofuel Industry Threatened with Shutdown – DTN1-30

    DTN Livestock Close: Positive Day for Cattle1-30

    Welch on Wheat: Texas Conditions Decline, Still Above Average1-30

    Doane Cotton Close: Strong Exports Don’t Provide Strong Support1-30

    AFB Grain-Soybean Close: General Weakness Continues1-30

    AFB Cotton Close: Narrow Trade Ends Lower1-30

    AFB Rice Close: Hard Sell Off1-30

    Harvard Farm Boy to Show Fellow Students Real Farmers – DTN1-30

    Welch on Grain: Corn, Sorghum Continue to See Strong Exports1-30

    DTN Cotton Close: Tight Trade Ends at Midrange1-30

    2015 Is International Year of the Soils – Video1-30

    Catfish Production Acres Declined 10%1-30

    USDA: Peanut Price Highlights1-30

    DTN Grain Close: Late Corn Rally1-30

    Weekly Cotton Market Review1-30

    DTN Livestock Midday: Cattle Futures Bounce Higher1-30

    DTN Grain Midday: Corn, Soybeans Lead Drop1-30

    Farm Management: 3 Reasons to Praise A Job Well Done – DTN1-30

    Farming: Leaner Profits Drive Farm Loans – Not Equipment Purchases1-30

    Ethanol Remains Competitive as Gasoline Blend Despite Price1-30

    DTN Cotton Open: Futures Start off Lower1-30

    DTN Livestock Open: Aggressive Pressure to Continue1-30

    Bt Corn Hybrid Manufacturers May Face New EPA Rules1-30

    DTN Grain Open: Trade Begins Quietly Higher1-30

    Georgia Cotton: Glyphosate-Resistant Pigweed Fight Requires Vigilance1-30

    Keith Good: $4.8 Billion Hit to Farm Program Possible Over 10 Years1-30

    Mississippi River Locks – ‘Held Together with Baling Wire and Duct Tape’ – DTN1-29

    Senate Passes Keystone Bill, Unable to Get Supermajority – DTN1-29

    ELS Cotton Competitive Payment Rate Is Zero1-29

    California: New Robotic Weeder to Save Time, Money1-29

    Peanut Stocks: Utilization Up 6% from Last Year1-29

    U.S. Grain Transportation: Corn Inspections Highest Since October1-29

    North Carolina: Cotton Variety Performance Data Available1-29

    Texas Pecans: Trade Slow as Harvest Winds Down1-29

    Western Region Pecans: Light Deliveries, Harvest Nearly Done1-29

    U.S. Energy: Market Balances Seen in Changing Futures Price Spreads1-29

    Gasoline Prices: Average Declines Again1-29

    Propane Stocks: Down 1.9M Barrels1-29

    Diesel Prices: Average Drops 7 Cents1-29

    North Carolina: Feb. 4 Meeting Looks At Crop Mix, Marketing Decisions For 20151-28

    Biodiesel: Policy Incentives Necessary for Profitability1-28

    AgFax Peanut Review: Peanut Protein Cure for Nut Allergy?1-28

    DTN Fertilizer Trends: Fewer Pre-Purchases Than Normal1-28

    Ag Lenders’ Sentiment – Latest National Survey From K-State – (Audio)1-28

    Drones – The Next Big Tool in Agriculture1-28

    AgFax Rice Review: Govt. Action Requested Over Iraq Trade; Japan May Increase U.S. Imports1-28

    Seramas: Little Chickens With Great Personality1-28

    Ag Fuel Costs Likely to Dip, Chemicals to Rise in 2015 — DTN1-28

    Seed Companies Expected to Hold Line on Price Increases — DTN1-28

    Soybeans: Higher Protein Levels Mean Better Quality, Better Prices – DTN1-27

    Crop Insurance: Most Corn Farmers Opting for PLC – DTN1-27

    Soybean Rust Turns Up In Louisiana On Kudzu1-27

    Florida: AgSave Summit Meetings, Feb. 231-27

    Crop Insurance: Difference in Expected Program Payments1-27

    Wild Hogs: North Carolina Hunter Scores Record Kill1-27

    Soybeans: East Coast Winter Weather Is No Match for Biodiesel1-27

    Cotton: Industry Recognizes Utah Researcher For Cotton Genome Efforts1-27

    Corn and Soybean Market: Consumption is the Story1-27

    Sunbelt Ag Events

     

    About Us

    AgFax.Com covers agricultural trends and production topics, with an emphasis on news about cotton, rice, peanuts, corn, soybeans, wheat and tree crops, including almonds, pecans, walnuts and pistachios.

      

    This site also serves as the on-line presence of electronic crop and pest reports published by AgFax Media LLC (formerly Looking South Communications).

        

    Click here to subscribe to our free reports.

      

    We provide early warnings and confirmations about pests, diseases and other factors that influence yield. Our goal is to quickly provide farmers and crop advisors with information needed to make better and more profitable decisions.

         

    Our free weekly crop and pest advisories include:

    • AgFax Midsouth Cotton, covering cotton production and news in Alabama, Arkansas, Louisiana, Mississippi, Tennessee and Missouri.

    • AgFax Southeast Cotton, covering cotton production and news in Alabama, Florida, Georgia, North Carolina, South Carolina and Virginia.

    • AgFax Southwest Cotton (new for 2013!), covering cotton production and news in Texas, Oklahoma, Kansas and New Mexico.

    • AgFax West (formerly MiteFax: SJV Cotton), covering California cotton, alfalfa, tomatoes and other non-permanent crops in California's Central Valley.

    • AgFax Rice covering rice production and news in Arkansas, Louisiana, Mississippi, Missouri and Texas.

    • AgFax Peanuts, covering peanut production in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, North Carolina, South Carolina, Texas and Virginia.

    • AgFax Southern Grain: covering soybeans, corn, milo and small grains in Southern states.

    • AgFax Almonds, covering almonds, pistachios, walnuts and other tree crops in California's Central Valley.

    • AgCom 101, providing guidance to ag professionals involved in social media.

    Our newsletters are sponsored by the following companies: FMC Corporation Chemtura Dow AgroSciences.

          

    Mission statement:

    Make it as easy as possible for our community of readers to find and/or receive needed information.

              

    Contact Information:

    AgFax Media. LLC

    142 Westlake Drive Brandon, MS 39047

    601-992-9488 Office 601-992-3503 Fax

    Owen Taylor Debra L. Ferguson Laurie Courtney

          

    Circulation Questions?

    Contact Laurie Courtney