Welch on Grain: Corn Stocks Raised on Decreased Usage

    ©Debra L Ferguson Stock Photography

    Market Situation

    WASDE. The only change USDA made to the 2015/16 U.S. corn supply and demand balance sheet in yesterday’s World Agricultural Supply and Demand Estimates was as a result of changes in the old crop. Carryover in the current marketing year (2014/15) was increased as ethanol use was reduced 25 million bushels. That raised beginning stocks in the new crop which, with no other adjustments, raised ending stocks. The stocks to use ratio increased from 12.7% to 12.9% but the season average farm price estimate was unchanged at $3.50, $0.20 below the PLC reference price.

    No changes were made to the supply and demand estimates for grain sorghum.

    As in the case of U.S. corn, the major change to world corn supply and demand for 2015/16 was due to an increase in beginning stocks, up 4.51 mmt. The production estimate for 2014/15 was 3.3 mmt higher, use was down 0.5 mmt and beginning stocks up 0.7 mmt. Increased beginning stocks in 15/16 combined with a slight decrease in production (-0.53 mmt) and increase in use (+0.70 mmt), raised estimated world ending stocks 3.25 mmt. The days of use on hand at the end of the marketing year increased by 1 day, from 70.74 to 71.88.

    Crop Progress. U.S. corn crop condition index slipped one point this week from 383 to 382. The very poor category was zero last week and 1% currently, fair decreased 1% as did good, with corn rated excellent up 1%. The average rating for this time of year is 371.

    Outside Markets. Last Friday’s employment report showed the U.S. economy added 280,000 jobs in May and revised the April numbers up from 85,000 to 119,000. The overall unemployment rate (U3) increased from 5.4% to 5.5% as more persons returned to the labor force looking for work. Better than expected job creation is a positive sign of economic growth, especially in light of the negative GDP estimates for the 1st quarter of 2015.

    This adds support for the argument that slow growth this winter was due to weather effects and labor disputes in ports on the west coast. The broader unemployment measure, U6, which includes persons working part time for economic reasons held steady at 10.8%.

    The difference between U6 and U3 decreased to 5.3%; the 21-year average difference between U3 and U6 is 4.7%. U3 is back within prerecession ranges while U6 is still above (most recent prerecession high, 10.4% in September 2003.

    Marketing Strategies

    2015 Corn Marketing Plan. I am 40% priced on the 2015 crop and we are entering the time frame when I will price the next 20%. Early season crop conditions are pressuring prices for now but we have a long way to go before the area and yield of this year’s crop are known. Use estimates remain firm.

    Upcoming Reports/Events.
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    June 26 – Quarterly Hogs and Pigs
    June 30 – Acreage; Grain Stocks

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