KSU Corn Market Outlook in December 2014: The case for $3.95 /bu in MY 2014/15 and $4.20 /bu in MY 2015/16

An analysis of U.S. and World corn supply-demand factors and 2014-2015 price prospects following the USDA’s December 10th 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 December 2014″ 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/Corn.asp

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Summary

Introduction

Since the USDA released its World Agricultural Supply and Demand Estimates (WASDE) reports on December 10th, MAR 2015 and DEC 2015 corn futures prices have moved higher, raising hopes of an eventual return 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 problems occur in other major coarse grain production regions of the World (such as in South America or Ukraine). Absent such a foreign production shortfall in coming months, price prospects are likely to be 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 2014 U.S. corn production to be a record 14.407 billion bushels (bb), based on projected planted and harvested acreage of 90.885 million acres or ‘ma’, and 83.097 ma, respectively, and a record 2014 U.S. corn yield of 173.4 bushels per acre. The USDA projected record U.S. corn total supplies of 15.668 bb (billion bushels), up 6.0% from 14.782 bb last year. Projected MY 2014/15 total corn usage of 13.670 bb (up 10 mb or million bushels from a month ago) is also a record, with ethanol use of 5.150 bb (up 16 mb from MY 2013/14), non-ethanol FSI use of 1.395 bb (up 10 mb from a month ago), exports of 1.750 bb (down 167 mb from a year ago), and feed and residual use of 5.375 bb (up 243 mb vs last year).

“Current crop” ending stocks are forecast at 1.998 bb (14.6% S/U) – up from 1.236 bb (9.1% S/U) in MY 2013/14, and from 821 mb (7.4% S/U) in MY 2012/13. The USDA left unchanged its forecast that “current crop” MY 2014/15 U.S. average cash corn prices will be in the range of $3.20-$3.80 per bu. with a midpoint of $3.50 – down from $4.46 in MY 2013/14, and $6.89 in MY 2012/13.

KSU U.S. Corn S/D Forecast for “Current Crop” MY 2014/15

An alternative projection by KSU Extension to the USDA for “current crop” MY 2014/15 U.S. corn supply-demand and prices is as follows: “Increased Usage” Scenario: 30% prob. of 15.668 bb U.S. corn supplies (same as USDA), 13.965 bb total use (up 2.2% from USDA), 1.703 bb ending stocks, 12.2% S/U, & $3.95 /bu U.S. corn price (compared to $3.50 /bu by the USDA).

KSU U.S. Corn S/D Forecast for “Next Crop” MY 2015/16

A KSU projection for “next crop” MY 2015/16 for U.S. corn is as follows: “2015 Less 2 Million Acre” Scenario: 88.885 ma planted in 2015, 81.268 ma harvested, trend yields of 162.7 bu/ac, 2015 U.S. corn production of 13.222 bb, U.S. corn supplies of 15.246 bb, total use of 13.700 bb, ending stocks of 1.545 bb, 11.3% S/U, & $4.20 /bu U.S. corn season average prices.

World Corn Supply-Demand

World total supplies of 1,164 mmt are projected for “current crop” MY 2014/15, up from 1,127 mmt in MY 2013/14, and from 1,002.5 mmt in MY 2012/13. Projected World corn ending stocks of 192.2 mmt (19.8% S/U) in “current crop” MY 2014/15 are up from 173 mmt (18.1% S/U) in MY 2013/14, and from 138 mmt (15.9% S/U) in MY 2012/13.

Combined “current crop” MY 2014/15 corn production for the U.S.’ major export competitors Brazil (75.0 mmt – down 4.3) and Argentina (22.0 mmt – down 3.0) is projected to be down 7.3 mmt from MY 2013/14. Forecast Ukraine 2014 corn production of 27.0 mmt is down 3.9 mmt from a year ago. South American acreage decisions either have been or are being made now for later plantings of 2015 crops in the Dec-January period.

U.S. Corn Acreage Decisions in 2015

With closing CME NOV-2015 soybean futures of $10.02 and CME DEC-2015 corn futures of $4.30 ¾ on 12/16/2014, the soybean/corn price ratio of 2.33 is neutral for the two crops in the U.S. (i.e., being essentially equal to the customary 2.3 breakeven level). If South American farmers were to shift sizable acreage away from corn into 2015 soybeans – markedly diminishing foreign 2015 production prospects, and/or have weather-induced 2015 corn production problems, then by March-April 2015 World corn market price prospects for “next crop” MY 2015/16 could be positively affected – which could impact U.S. farmers’ 2015 spring planting choices (i.e., more U.S. corn acres, and less soybean acres).

https://i1.wp.com/harvestpublicmedia.org/sites/default/files/styles/article_main_image/public/0112_corn-1.jpg

Kansas Corn Stubble & Grain Storage in 2012 (Source: http://harvestpublicmedia.org/article/965/surprise-corn-stocks-are/5)

https://i1.wp.com/images.morris.com/images/cjonline/mdControlled/cms/2008/02/23/250015597.jpg

Corn being used at a Kansas ethanol plant in 2008 (Source: http://cjonline.com/stories/022308/bus_250015541.shtml)

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