An analysis of U.S. and World corn supply-demand factors and 2015/16 price prospects following the USDA’s February 9, 2016 USDA Crop Production and World Agricultural Supply Demand Estimates (WASDE) reports is available on the KSU AgManager website: http://www.agmanager.info/default.asp
Following is a summary of the article on “Corn Market Outlook in February 2016″ with the full article and accompanying analysis soon to be available on the KSU AgManager website at the following web address: http://www.agmanager.info/marketing/outlook/newletters/Corn.asp
Since the USDA’s February 9th World Agricultural Supply and Demand Estimates (WASDE) report, corn futures have traded sideways-to-lower. With a third consecutive large U.S. corn crop in the 13.6 to 14.2 billion bushel (bb) range plus along with sizable foreign coarse grain crops in the “new crop” 2015/16 marketing year, it will be difficult for corn futures prices to rise to $4.25-$4.50+ by May-June 2016 unless unexpected crop production problems occur South America, larger than expected U.S. corn usage occurs in response to low U.S. and World corn prices, or significant planting and establishment problems occur for the 2016 U.S. corn crop. If low corn prices persist through spring 2016 – limiting corn net returns – U.S. farmers may reduce 2016 corn acreage and 2016 U.S. corn production prospects as a result.
Market factors such as a) international geopolitical conflicts, b) financial market disruptions, c) U.S. farmer resistance to selling at low February-March 2016 cash corn prices, and d) “El Nino” or “El Nino-La Nina transition”- related weather patterns in spring-summer 2016 with negative impacts on 2016 crop production, could each still impact corn market prices through summer-fall 2016. Also, low feedgrain prices have resulted in lower input costs for U.S. and Foreign livestock feeding and bioenergy users – leading to increased feedgrain usage. The high value of the U.S. dollar and prospects for a large 2016 South American corn crop have been significant limiting factors for U.S. corn exports.
USDA Estimate for “New Crop” MY 2015/16
The USDA estimated 2015 U.S. corn production of 13.601 bb, and for “new crop” MY 2015/16 that there would be total supplies of 15.382 bb. Total use of 13.545 bb (down 25 million bushels or ‘mb”) – which includes ethanol use of 5.225 bb (up 25 mb over 1 month ago), non-ethanol FSI use of 1.370 bb, exports of 1.650 bb (down 50 mb from January, and 100 mb from December projections), and feed and residual use of 5.300 bb. Ending stocks are forecast at 1.837 bb (13.56% S/U) in MY 2015/16 – up 35 mb from last month, and up from 1.731 bb (12.6% S/U) in “old crop” MY 2014/15, and 1.232 bb (9.2% S/U) in MY 2013/14. U.S. corn average cash prices are forecast the range of $3.35-$3.85 /bu. ($3.60 midpoint) versus $3.70 in “old crop” MY 2014/15, $4.46 in MY 2013/14, and $6.89 (record) in MY 2012/13.
USDA Forecast for “Next Crop” MY 2016/17
In their early release Agricultural Projections to 2025 the USDA provided an initial forecast of U.S. corn supply-demand and prices for the “next crop” 2016/17 marketing year beginning September 1, 2016. The USDA projected 2016 U.S. corn plantings of 90.500 million acres (ma) – up 2.501 ma from 2015. Forecast 2016 harvested acres of 82.700 ma would be up 1.951 ma vs 2015. With projected yields of 168.1 bu/ac, 2016 U.S. corn production is projected to be 13.900 billion bushels (bb) – 2nd highest on record behind 14.216 bb in 2014. With forecast MY 2016/17 total use of 13.935 bb (record high), and an adjusted projection of ending stocks of 1.832 bb (13.15% S/U), U.S. corn prices are projected by the USDA to be $3.60 /bu – unchanged from the $3.60 /bu midpoint estimate for “new crop” MY 2015/16.
KSU Forecast for “Next Crop” MY 2016/17
Based on adjustments to the USDA Agricultural Projections to 2025, KSU projections are for 2016 U.S. corn plantings of 90.500 (unchanged from the USDA), but with 2016 harvested acres of 83.079 ma (91.8% harvested-to-planted, equal to MY 2015/16), with trend yields of 164.5 bu/ac, and 2016 U.S. corn production of 13.666 bb. With forecast MY 2016/17 total use of 13.760 bb, and an adjusted projection of ending stocks of 1.773 bb (12.89% S/U), U.S. corn prices are projected by KSU to be $3.70 /bu – up $0.10 /bu from the USDA’s early projection for “next crop” MY 2016/17.
KSU 2016 U.S. Corn “Short Crop Scenario – 13.000 Billion Bushels
If significant corn production problems were to occur in the U.S. in the summer of 2016 resulting in a 13.000 bb corn (156.5 bu/ac yield on 83.079 ma harvested), then all else being equal, ending stocks in “next crop” MY 2016/17 could decline to 1.107 bb (8.0% S/U), with U.S. corn prices likely to increase to $5.00-$5.50 per bushel.
World Corn Supply-Demand
World total supplies of 1,176.1 million metric tons (mmt) are projected for “new crop” MY 2015/16, down marginally from 1,183.8 mmt in “old crop” MY 2014/15, but up from 1,124.1 mmt in MY 2013/14. Projected World corn ending stocks of 208.8 mmt (21.6% S/U) in “new crop” MY 2015/16 are up from 206.2 mmt (21.1% S/U) in “old crop” MY 2014/15, and from 174.8 mmt (18.4% S/U) in MY 2013/14.