Welch on Grain: Domestic Corn Usage Down, Exports Up

    Market Situation

    WASDE. Today’s World Agricultural Supply and Demand Estimates from USDA contained the first estimates of the 2015/16 marketing year as well as revisions to the old crop year. In the 2014/15 corn marketing year, feed and residual use was lowered 50 million bushels, food, seed, and industrial lowered 48 million bushels and exports increased 25 million bushels. No changes were made to the supply side of the balance sheet.

    These revisions resulted in an increase in ending stocks in 14/15 from the April estimate of 1,777 million bushels to 1,827 today. The revised season average farm price for corn is $3.65. With a reference price of $3.70, if this price holds, the PLC payment for 2014/15 would be $0.05/bushel.

    In addition to larger carryin from 2014/15, corn production in 2015/16 is projected to be down about 4% on lower area and yield. Domestic use is up slightly on a small increase in feed and food; ethanol is unchanged. Exports are higher by 75 million bushels raising total use by 138 million bushels. Estimated ending stocks are 1,746 million bushels, down 105 million. The price estimate is $3.50, $0.20 below the reference price.

    World corn production is forecast to be lower by about 6 mmt in 2015/16 and use up by 13 mmt. This difference is offset by increased beginning stocks of 19 mmt. Ending stocks are projected to be down only slightly, but the higher use estimate lowers days on hand at the end of the marketing year by about a day, from a 72 day supply to 71.

    Crop Progress. Corn planting for 2015 is running ahead of the normal pace, 75% in the ground at the end of week 19. Since 1980, the average for this week is 65%, the high was 89% in 2005, and the low 26% in 2013.

    Outside Markets. The jobs report from the Bureau of Labor Statistics last week showed that the U.S. economy added 223,000 jobs in April, up from a revised 85,000 in March (previously 126,000). This number was in line with trade expectations ahead of the release.

    The civilian unemployment rate (U3) dropped 0.1% as did U6, the broader unemployment measure which includes persons working part time for economic reasons. U3 at 5.4% is the lowest since May 2008 and U6 at 10.8% is the lowest since August 2008. The difference between U6 and U3 held steady at 5.4%. The 21-year average difference between U3 and U6 is 4.7%.

    Marketing Strategies

    2015 Corn Marketing Plan. Corn prices were little changed in response to today’s report. I am 40% priced on the 2015 crop. We are entering the time frame when I will price the next 20%, expecting prices to be influenced by early season weather and the upcoming grain stocks and acreage report.

    Upcoming Reports/Events.
    May 22 – Cattle on Feed
    June 10 – WASDE
    June 19 – Cattle on Feed
    June 26 – Quarterly Hogs and Pigs
    June 30 – Acreage; Grain Stocks

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