An analysis of U.S. and World corn supply-demand factors and 2014 price prospects following the USDA’s February 10th USDA Crop Production and World Agricultural Supply Demand Estimates (WASDE) reports will be available on the KSU AgManager website on Wednesday, February 18th (http://www.agmanager.info/default.asp).
Following is a summary of the article on “Corn Market Outlook in February 2015″ with the full article and accompanying analysis will soon be available on the KSU AgManager website at the following web address: http://www.agmanager.info/marketing/outlook/newletters/archives/GRAIN-OUTLOOK_02-18-15_Corn.pdf
Since the USDA released its World Agricultural Supply and Demand Estimates (WASDE) reports on February 10th, MAR 2015 and DEC 2015 corn futures prices have moved sideways, raising hopes that seasonal lows in January-February have occurred, and that prices may eventually move higher into the spring and provide eventual returns to storage for U.S. crop producers resisting sales at sub-$4.00 cash prices. With 1) a record high 2014 U.S. corn crop, and 2) prospects for record or near-record World corn production and ending stocks in the “current crop” 2014/15 marketing year, prospects for a corn futures price rally above say $5.00 appear limited – unless unexpected and substantial crop production or export availability problems occur in other major coarse grain production regions of the World (such as in South America or Ukraine). Absent these occurrences, price prospects are limited until at least April-May 2015 – the main U.S. corn planting season.
USDA U.S. Corn Forecast for “Current crop” MY 2014/15
The USDA left unchanged its forecast of 2014 U.S. corn production to be a record 14.216 billion bushels (bb), based on projected planted and harvested acreage of 90.597 million acres or ‘ma’, and 83.136 ma, respectively, and a record 2014 U.S. corn yield of 171.0 bushels per acre. Projected record U.S. corn total supplies of 15.668 bb (billion bushels) are up 5.4% from 14.686 bb last year. Projected MY 2014/15 total corn usage of 13.645 bb (up 50 mb or million bushels from a month ago) is also a record, with ethanol use of 5.250 bb (up 116 mb from last year), non-ethanol FSI use of 1.395 bb (up 28 mb), exports of 1.750 bb (down 167 mb from a year ago), and feed and residual use of 5.250 bb (up 214 mb vs last year). Ending stocks are forecast at 1.827 bb (13.4% S/U) – down 50 mb from a month ago, but up from 1.232 bb (9.2% S/U) in MY 2013/14, and 821 mb (7.4% S/U) in MY 2012/13. The USDA forecast that “current crop” MY 2014/15 U.S. average cash corn prices to be in the range of $3.40-$3.90 per bu. with a midpoint of $3.65 – vs. $4.46 in MY 2013/14, and $6.89 in MY 2012/13.
KSU U.S. Corn Increased Usage Scenario for “Current Crop” MY 2014/15
An alternative KSU forecast for “current crop” MY 2014/15 is: 20% prob. of 15.472 bb U.S. corn supplies (same as USDA), 13.741 bb total use (up 0.7% from USDA), 1.731 bb ending stocks, 12.6% S/U, & $3.80 /bu U.S. corn price (up $0.15 vs USDA)
KSU U.S. Corn S/D Forecasts for “Next Crop” MY 2015/16
Two KSU projections for “next crop” MY 2015/16 are as follows:
a) “2015 Less 3 Million Acre-13.4 bb Production” Scenario: 87.597 ma planted, 80.248 ma harvested, early season USDA baseline forecast yields of 167.2 bu/ac, 2015 U.S. corn production of 13.417 bb, total supplies of 15.269 bb, total use of 13.725 bb, ending stocks of 1.444 bb, 10.52% S/U, & $4.15 /bu U.S. corn MYA prices;
b) “2015 Less 3 Million Acre-13.0 bb Production” Scenario: Planted and harvested acres unchanged, but a KSU trend line yield forecast of 162.3 bu/ac, U.S. corn production of 13.024 bb, total supplies of 14.876 bb, total use of 13.585 bb, ending stocks of 1.291 bb, 9.50% S/U, & $4.30 /bu U.S. corn MYA prices.
World Corn Supply-Demand
World total supplies of 1,165 mmt are projected for “current crop” MY 2014/15, up from 1,127 mmt in MY 2013/14, and 1,002.5 mmt in MY 2012/13. Projected World corn ending stocks of 189.6 mmt (19.5% S/U) in “current crop” MY 2014/15 are up from 172 mmt (18.1% S/U) in MY 2013/14, and from 138 mmt (16.0% S/U) in MY 2012/13.
Combined MY 2014/15 corn production of major exporters Brazil (75.0 mmt – down 4.5) and Argentina (23.0 mmt – down 3.0) is projected to be down 10.5 mmt (down 10%) from MY 2013/14. Forecast Ukraine 2014 corn production of 28.5 mmt is down 2.45 mmt from a year ago.
With closing CME NOV-2015 soybean futures of $9.86 ¼ and CME DEC-2015 corn futures of $4.20 ½ on 2/17/2015, the soybean/corn price ratio of 2.35 is neutral for the two crops in the U.S. (i.e., being equal to the customary 2.3 breakeven level). Lack of profitability for U.S. corn at expected 2015 harvest prices is likely to limit 2015 U.S. corn planted acres and corn production potential, and to provide at least a moderate amount of support for U.S. corn prices in “next crop” MY 2015/16.