An analysis of U.S. and World corn supply-demand factors and 2017/18 price prospects following the USDA’s December 1st Preliminary forecasts for “Next Crop” 2017/18 (https://www.usda.gov/oce/commodity/projections/) and the December 9, 2016 USDA World Agricultural Supply Demand Estimates (WASDE) reports will be available on the KSU AgManager website: http://www.agmanager.info/default.asp
Following is a summary of the article on “Corn Market Outlook in December 2016″ with the full article and accompanying analysis soon to be available on the KSU AgManager website at the following web address:
Corn Futures & Kansas Cash Corn Market Situation
Since the USDA’s December 9th World Agricultural Supply and Demand Estimates (WASDE) report, MARCH 2016 CME corn futures have trended lower. On the day of the report, MARCH 2016 corn futures closed at $3.59 ½ per bushel, and then moved to a high of $3.63 on December 15th, before declining to a close of $3.45 ¾ on Friday, December 23rd. The USDA’s forecast of a record large 2016 U.S. corn crop 15.226 billion bushels (bb) and large 2016/17 marketing year ending stocks of 2.403 bb have continued to be the primary limiting focus of U.S. corn market prices.
Cash corn prices in at major grain elevators in central and western Kansas have declined below $3.00 per bushel down to the range of $2.66 to $2.96 per as of December 23rd, but have not fallen down to marketing loan rates near $2.05 (central KS) to $2.19 (western KS) per bushel. Cash corn prices in east central and northeast Kansas – near river terminal locations – were in the range of $3.26-$3.28 per bushel on 12/23/2016. Although the “large supply and tight storage availability” situation predominates in local Kansas grain markets, it is a positive sign that corn usage has provided enough market support that Kansas cash corn prices have not fallen down to USDA loan rate – price support levels.
Other Market Factors to Consider
Other market factors to consider that could affect the U.S. corn market in 2017 include: 1) the pace and timing of U.S. farmer marketing of the 2016 corn crop – much of which had been placed in storage after fall harvest and likely will be held for sale through the winter into at least early spring 2017, 2) anticipation of continued strong use of 2016 crop U.S. corn for domestic U.S. ethanol production and livestock feeding, 3) at least moderate strength in U.S. corn exports – driven partly by a poor harvest and lack of exportable supplies in Brazil in 2016 as well as other World corn market factors, and 4) the always present possibility of broader U.S. and Foreign economic and/or financial system disruptions impacting grain, energy, and other commodity markets in 2017.
For example, U.S. financial policy announcements by the U.S. Federal Reserve in 2017 could lead to increases in U.S. interest rates and the value of the U.S. dollar relative to other World currencies, which could in turn have a negative impact on U.S. corn exports. Also, World geo-political events could provide an unanticipated “shock” to U.S. and World energy and grain markets – with the impact on the direction of U.S. and World corn markets being difficult to anticipate.
USDA Supply-Demand Forecast for “Current” MY 2016/17
With USDA projections of 2016 U.S. corn plantings of 94.490 ma, harvested acres of 86.836 ma, record high projected yields of 175.1 bu/ac (vs 168.4 bu/ac in 2015 and the previous record high of 171.0 bu/ac in 2014), 2016 U.S. corn production is forecast to be a record high 15.226 bb – up from 13.601 bb in 2015, the previous record of 14.216 bb in 2014, and 13.829 bb in 2013.
With forecast “current” MY 2016/17 total supplies of 17.031 bb (record high), total use of 14.610 bb (record high), and projected ending stocks of 2.403 bb (16.45% S/U) – up from 1.738 bb (12.72% S/U) in MY 2015/16 and the highest since 4.259 bb (54.90% S/U) in MY 2004/05 – U.S. corn prices are projected by the USDA to be in the range of $3.05-$3.65 (midpoint = $3.35 /bu) – being down from $3.61 /bu for MY 2015/16. (continued)
USDA Supply-Demand Forecast for “Next Crop” MY 2017/18
With early USDA projections of 2017 U.S. corn plantings of 90.000 ma (down 4.490 ma), harvested acres of 82.300 ma (down 4.536 ma), projected yields of 170.8 bu/ac (vs the record high of 175.3 in 2016), 2017 U.S. corn production is forecast to be 14.060 bb – down from the record high of 15.226 bb in 2016.
With forecast “next crop” MY 2017/18 total supplies of 16.513 bb (down 500 mb from last year’s record high), total use of 14.215 bb (down 395 mb from last year’s record high), and projected ending stocks of 2.298 bb (16.17% S/U) – down from 2.403 bb (16.45% S/U) in “current” MY 2016/17 – U.S. corn prices are projected by the USDA to average $3.30 /bu. This scenario is given a 55% likelihood of occurring by KSU Extension Ag Economist D. O’Brien.
Alternative KSU Forecasts for “Next Crop” MY 2017/18
Three alternative KSU-Scenarios for U.S. corn supply-demand and prices are presented for “next crop” MY 2017/18. Each forecast scenario presents the likelihood of lower U.S. corn yields and production than projected by the USDA in the December 1st USDA early supply-demand estimate for “next crop” MY 2017/18.
KSU “Next Crop” MY 2017/18 Scenario #1) “167.4 bu/ac – 13.777 bb” Scenario (25% probability) assumes: 90.000 ma planted, 82.300 ma harvested, 167.4 bu/ac trend yield, 13.777 bb production, 16.230 bb total supplies, 14.215 bb total use, 2.015 bb ending stocks, 14.18% S/U, & $3.55 /bu U.S. corn average price for “next crop” MY 2017/18;
KSU “Next Crop” MY 2017/18 Scenario 2) “165.0 bu/ac – 13.580 bb” Scenario (15% probability) assumes: 90.000 ma planted, 82.300 ma harvested, 165.0 bu/ac yield, 13.580 bb production, 16.033 bb total supplies, 14.215 bb total use, 1.818 bb ending stocks, 12.79% S/U, & $3.70 /bu U.S. corn average price for “next crop” MY 2017/18;
KSU “Next Crop” MY 2017/18 Scenario #3) “150.0 bu/ac – 12.345 bb” Scenario (5% probability) assumes: 90.000 ma planted, 82.300 ma harvested, 150.0 bu/ac yield, 12.345 bb production, 14.798 bb total supplies, 13.460 bb total use, 1.338 bb ending stocks, 9.94% S/U, & $4.30 /bu U.S. corn average price for “next crop” MY 2017/18;
World Corn Supply-Demand
Record high World corn production of 1,039.7 million metric tons (mmt) is projected for “current” MY 2016/17, up 8.2% from 961.1 mmt in MY 2015/16, and up 2.5% from 1,014.0 mmt in MY 2014/15. Record high World corn total supplies of 1,248.7 mmt are projected for “new crop” MY 2016/17, up from 1,169.3 mmt in MY 2015/16, and from 1,188.8 mmt in MY 2014/15.
World corn exports of 147.7 mmt are projected for “new crop” MY 2016/17, up 21.8% from 121.2 mmt in MY 2015/16, and up 3.9% from 142.2 mmt in MY 2014/15. Projected record high World corn ending stocks of 222.25 mmt (21.7% S/U) in “new crop” MY 2016/17 are up from 208.95 mmt (21.8% S/U) in MY 2015/16, and from 208.3 mmt (21.2% S/U) in MY 2014/15.
Although World corn ending stocks are projected to be a record high in “new crop” MY 2016/17 at 222.25 mmt, World corn percent ending stocks-to-use in “new crop” MY 2016/17 are forecast to actually decline marginally to 21.7% – indicative that strong World demand for corn at low prices is expected to continue – especially in Europe where grain production has been hampered by extreme weather conditions in the last year.