KSU Corn Market Outlook: Assessing the U.S. Corn Market in Late 2015

An analysis of U.S. and World corn supply-demand factors and 2015/16 price prospects following the USDA’s December 9, 2015 USDA Crop Production and World Agricultural Supply Demand Estimates (WASDE) reports, and the USDA Agricultural Baseline projections to 2025 will be available on the KSU AgManager website on Monday, December 21st  (http://www.agmanager.info/default.asp).

Following is a summary of the article on “Corn Market Outlook in Mid-December 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

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Summary

Overview

Since the USDA’s December 9th World Agricultural Supply and Demand Estimates (WASDE) report, corn futures have traded in a volatile sideways pattern. With expectations of a third consecutive 13.6 billion bushel (bb) plus U.S. corn crop in 2015 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 $4.50-$5.00+ by spring 2016 unless crop production problems occur South America or larger than expected U.S. corn usage occurs in response to low U.S. and World corn prices. If low corn prices persist through spring 2016 – limiting corn net returns – it is likely that U.S. farmers will 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 winter 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 – supporting the profitability for U.S. and Foreign livestock feeding and bioenergy users and leading to increased feedgrain usage. The high value of the U.S. dollar has been a limiting factor for U.S. corn exports.

USDA Forecast for “New Crop” MY 2015/16

The USDA projected 2015 U.S. corn production of 13.654 billion bushels (bb), and for “new crop” MY 2015/16 that there would be total supplies of 15.415 bb, and total use of 13.630 bb (down 25 mb) – which includes ethanol use of 5.200 bb (up 25 mb over 1 month ago), non-ethanol FSI use of 1.380 bb, exports of 1.750 bb (down 25 mb from November and 75 mb from October projections) and feed and residual use of 5.300 bb. Ending stocks are forecast at 1.785 bb (13.54% S/U) in MY 2015/16 – up 25 mb from last month, and up from 1.731 bb (12.6% S/U) in “old crop” MY 2014/15. U.S. corn average cash prices are forecast the range of $3.35-$3.95 /bu. ($3.65 midpoint) versus $3.70 in “old crop” MY 2014/15, $4.46 in MY 2013/14, and $6.89 (record) in “drought stricken” MY 2012/13.

KSU U.S. Corn Market Forecasts

Projected supply-demand and price scenarios by KSU for “new crop” MY 2015/16 are as follows: a) “USDA S/D Estimates” Scenario (80% prob.): All supply-demand assumptions equal to the USDA’s, but with $3.60 /bu U.S. corn MYA prices; b) “2015 Smaller Crop” Scenario (10% prob.): U.S. corn yield of 167.0 bu/ac, 2015 U.S. corn production of 13.470 bb, total supplies of 15.232 bb, total use of 13.630 bb, ending stocks of 1.602 bb, 11.75% S/U, & $4.00 /bu U.S. corn MYA prices; and c) “2015 Economic Problems” Scenario (10% prob.): U.S. corn production and supplies equal to the USDA estimates, but lower total use of 13.435 bb, ending stocks of 1.980 bb, 14.7% S/U, & $3.40 /bu U.S. corn MYA prices.

USDA Forecast for “Next Crop” MY 2016/17

In their 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 90.5 million acres (ma) – up 2.119 ma from 2015. Forecast 2016 harvested acres of 82.7 ma would be 2.036 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. With forecast MY 2016/17 total use of 13.935 bb (record high), and ending stocks of 1.780 bb (12.77% S/U), U.S. corn prices are projected to be $3.60 /bu – down marginally from $3.65 /bu in “new crop” MY 2015/16.

World Corn Supply-Demand

World total supplies of 1,182.1 million metric tons (mmt) are projected for “new crop” MY 2015/16, down marginally from 1,183.7 mmt in “old crop” MY 2014/15, but up from 1,124.3 mmt in MY 2013/14. Projected World corn ending stocks of 211.9 mmt (21.8% S/U) in “new crop” MY 2015/16 are up from 208.2 mmt (21.3% S/U) in “old crop” MY 2014/15, and from 174.9 mmt (18.4% S/U) in MY 2013/14.

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