An analysis of U.S. and World corn supply-demand factors and 2015/16 price prospects following the USDA’s July 10th USDA Crop Production and World Agricultural Supply Demand Estimates (WASDE) reports will be available on the KSU AgManager website on Tuesday, July 21st (http://www.agmanager.info/default.asp).
Following is a summary of the article on “Corn Market Outlook in July 2015″ 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
Overview & Commentary
Since the USDA released its World Agricultural Supply and Demand Estimates (WASDE) report on July 10th, corn futures prices first rose and then have declined. With 1) a record high 2014 U.S. corn crop of 14.216 billion bushels (bb), 2) prospects for another large 2015 U.S. corn crop in the 13.2-13.8 bb range, and c) sizable 2015 foreign corn and other coarse grain crops, the likelihood of corn futures prices having a strong rally to the $4.75-$5.00 or above is limited. This situation could change if crop production or export availability problems occur in major World production and exporting regions (i.e., U.S., South America, the Black Sea Region) in coming months. IF major geopolitical conflicts and/or financial market problems occur in 2015-2016, grain markets could be extremely volatile, but the direction of potential grain price changes is difficult to predict.
The development of volatile weather patterns in 2015 such as “El Nino” may cause production problems for corn and other coarse grains in parts of the U.S., South America, Australia, India, and elsewhere in the next 6-12 months. Low feedgrain prices – resulting in lower input costs for U.S. and Foreign livestock feeding and bioenergy users – have helped to increase profitability of corn-using industries and led to increased feedgrain usage. A combination of these production and demand impacts in the future are likely to eventually bring about a change in the current World-wide “large crop – low price” market scenario faced in coarse grain and other agricultural markets.
USDA U.S. Corn Market Forecast
The USDA projected lower production, higher usage, moderately tighter ending stocks and stocks-to-use, and marginally higher U.S. prices for “new crop” MY 2015/16 than for the “current” 2014/15 marketing year. Projected 2015 U.S. corn production of 13.530 bb is down from 14.216 bb a year earlier, with total supplies of 15.334 bb in “new crop” MY 2015/16 down from 15.474 bb in “current” MY 2014/15. Projected MY 2015/16 total corn usage of 13.735 bb is a record (up from 13.696 bb in MY 2014/15), with ethanol use of 5.225 bb (up 25 mb vs a year earlier), non-ethanol FSI use of 1.360 bb (up 14 mb), exports of 1.875 bb (up 25 mb), and feed and residual use of 5.275 bb (down 25 mb).
Ending stocks are forecast at 1.599 bb (11.6% S/U) in “new crop” MY 2015/16 – down from 1.779 bb (13.0% S/U) in “current” MY 2014/15, but still up from 1.232 bb (9.2% S/U) in MY 2013/14, and 821 mb (7.4% S/U) in MY 2012/13. “New crop” MY 2015/16 U.S. average cash prices are forecast to be in the range of $3.45-$4.05 per bu. (midpoint of $3.75) versus to $3.60-$3.80 /bu ($3.70 midpoint) in “current” MY 2014/15, and $4.46 in MY 2013/14.
KSU U.S. Corn Market Forecasts
Projected supply-demand and price scenarios by KSU for “new crop” MY 2015/16 are as follows:
a) “2015 ‘Normal Crop’ 13.382 bb Production” Scenario (30% prob.): 88.897 ma planted, 81.101 ma harvested, yield of 165.0 bu/ac, 2015 U.S. corn production of 13.382 bb, total supplies of 15.186 bb, total use of 13.710 bb, ending stocks of 1.476 bb, 10.77% S/U, & $4.25 /bu U.S. corn MYA prices;
b) “2015 ‘Smaller Normal Crop’ 13.163 bb Production” Scenario (55% prob.): 88.897 ma planted, 81.101 ma harvested, KSU long term trend yield of 162.25 bu/ac, 2015 U.S. corn production of 13.163 bb, total supplies of 14.967 bb, total use of 13.625 bb, ending stocks of 1.342 bb, 9.84% S/U, & $4.35 /bu U.S. corn MYA prices; and
c) “2015 ‘Short Crop’ 12.571 bb Production” Scenario (15% prob.): Planted / harvested acres same as scenarios (a) & (b), but with a KSU low yield of 155.0 bu/ac, U.S. corn production of 12.571 bb, total supplies of 14.375 bb, total use of 13.405 bb, ending stocks of 970 mb, 7.24% S/U, & $6.90 /bu U.S. corn MYA prices.
World Corn Supply-Demand
World total supplies of 1,181 mmt are projected for “new crop” MY 2015/16, up from 1,176 mmt in “current” MY 2014/15, and 1,128 mmt in MY 2013/14. Projected World corn ending stocks of 190.0 mmt (19.2% S/U) in “new crop” MY 2015/16 are down marginally from 194.0 mmt (19.7% S/U) in “current” MY 2014/15, but up from 174.7 mmt (18.3% S/U) in MY 2013/14.
Kansas Corn Fields in 2013 (Source: http://kansasagnetwork.com/2013/kansas-farmers-able-to-catch-up-on-haying-herbicide-spraying-activities-and-wheat-planting-preperation/)