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      Welch on Grain: U.S. Corn Supplies at Record High

      Market Situation

      USDA Outlook Forum. The ending stock projection for the 2016/17 marketing year for corn is just below 2 billion bushels in numbers from the Outlook Forum last week.

      With harvested acres up 1.6 million, yields just below last year at a third all-time best 168, and an additional 106 million bushels of beginning stocks, the total corn supply is at a record 15.7 billion bushels.

      Use is up 180 million bushels over the current marketing year but still below the record set in 2014/15. The season average farm price is projected at $3.45, down $0.15 from the current $3.60.

      RMA Base Price. Though not yet official, the average closing price of the December corn contract for the month of February is 386. The average closing price of the November soybean contract in February is 885. These prices are what RMA will use to set the base price for corn, grain sorghum and soybeans with a sales closing date of March 15.

      The soybean to corn price ratio for 2016 is 2.29 about where we have been most often in recent years. Ratios in the extreme from 2.0 to 2.5 have suggested a significant swing in acres. A ratio between 2.2 and 2.3 suggests a relative stable relationship between corn and soybean acres. USDA will survey producers as to planting intentions the first two weeks of March and release those findings on March 31.

      Grain Use. Ethanol production had another strong week for February 19th. Production was 105% of last year and 111% of average. So far this corn marketing year, ethanol production has averaged 40.794 million gallons per day, implying the use of 5.318 billion bushels of corn. The February WASDE estimated corn for fuel at 5.225 billion bushels.

      Outside Markets. The Bureau of Economic Analysis released updated estimates of fourth quarter U.S. GDP on Friday. Economic growth, though still modest, increased at an annual rate of 1.0%, above expectations for a 0.5% increase. Real GDP growth in the third quarter was 2.0%. Of concern is that the changes were mostly impacted by business inventories, not consumer spending which accounts for about 70% of the U.S. economy.

      In the initial estimate, consumer spending was up 2.2%. That number was revised lower in this the second estimate to 2.0%. It seems likely the Fed would need to see the rate of GDP growth pick up significantly before announcing another round of interest rate hikes.

      Marketing Strategies

      2016 Feed Grain Marketing Plan. My marketing plan for 2016 again calls for breaking up sales over 4 pre-harvest time periods and the final 20% at harvest, along seasonal tendencies in the corn market. Revised budget projections show a breakeven price of corn of $3.85 and $3.70 for grain sorghum. I am currently 20% priced on new crop corn at 389.25. I am looking for uncertainty around acres and weather to provide additional pricing opportunities this spring.

      Upcoming Reports/Events.
      January 20-March 3 – Master Marketer, Abilene, Texas.
      March 8 – Short-term Energy Outlook
      March 9 – WASDE
      March 18 – Cattle on Feed
      March 25 – Hogs and Pigs
      March 31 – Grain Stocks; Prospective Plantings

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