KSU Corn Market Outlook in March 2016: The “Likely” vs the “Possible” Corn Market Outcomes in 2016

This article provides an analysis of U.S. and World corn supply-demand factors and price prospects for both the “current” 2015/16 and “next” 2016/17 marketing years following the USDA’s 2016 Agricultural Outlook Forum in Arlington, Virginia on February 25-26, and the USDA’s March 9, 2016 USDA Crop Production and World Agricultural Supply Demand Estimates (WASDE) reports are available on the KSU AgManager website:  http://www.agmanager.info/default.asp

Following is a summary of the article on “Corn Market Outlook in March 2016″ 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




Since the USDA’s March 9th World Agricultural Supply and Demand Estimates (WASDE) report, corn futures have traded higher. With a third consecutive large U.S. corn crop in the 13.6 to 14.2 billion bushel (bb) range in 2015 along with sizable foreign coarse grain crops in the “current” 2015/16 marketing year, it will be difficult for corn futures prices to rise to $4.25-$4.50+ by May-June 2016 unless a) unexpected late season corn production problems occur South America, b) larger than expected U.S. corn usage occurs in response to low U.S. and World corn prices during the March-May 2016 quarter, and/or c) significant planting and establishment problems occur for the 2016 U.S. corn crop. The impact of low corn prices – should they persist through spring 2016 leading to limited corn net returns prospects – may impact U.S. farmers’ 2016 corn acreage decisions and as a result 2016 U.S. corn production prospects.

Market factors such as a) economic and financial system disruptions impacting grain and energy commodity markets, b) U.S. farmer resistance to selling at low March-April 2016 cash corn prices, and c) concerns about possible “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 for U.S. and Foreign livestock feeding and bioenergy users – leading to strong domestic feedgrain usage and providing underlying support for U.S. corn exports. To date in the “current” 2015/16 marketing year the high value of the U.S. dollar and current prospects for a large 2016 South American corn crop have been significant limiting factors for U.S. corn exports.

USDA Estimate for “Current” MY 2015/16

The USDA made no changes in its estimate of the U.S. corn supply-demand balance sheet for “current crop” MY 2015/16 – with 2015 U.S. corn production of 13.601 bb, and total supplies of 15.382 bb for MY 2015/16. Total use is projected to be 13.545 bb – including ethanol use of 5.225 bb, non-ethanol Food, Seed, and Industrial (FSI) use of 1.370 bb, exports of 1.650 bb, and feed and residual use of 5.300 bb. Ending stocks are forecast at 1.837 bb (13.56% S/U) in “current” MY 2015/16 – up from 1.731 bb (12.6% S/U) in “old crop” MY 2014/15, and 1.232 bb (9.2% S/U) in MY 2013/14. U.S. corn average cash prices are forecast to be in the range of $3.40-$3.80 /bu. ($3.60 midpoint) versus $3.70 in “old crop” MY 2014/15, $4.46 in MY 2013/14, and $6.89 (record high) in MY 2012/13.

USDA Forecast for “Next Crop” MY 2016/17

At the USDA Agricultural Outlook Conference in Arlington, VA on February 25-26, the USDA 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 90.000 million acres (ma) – up 2.001 ma from 2015. Forecast 2016 harvested acres of 82.300 ma would be up 1.551 ma vs 2015. With projected yields of 168.0 bu/ac, 2016 U.S. corn production is projected to be 13.825 billion bushels (bb) – 3rd highest on record behind 13.829 bb in 2013 and 14.216 bb in 2014, but greater than 13.601 bb in 2015. With forecast MY 2016/17 total use of 13.725 bb (2nd highest behind 13.748 bb in MY 2014/15), and projected ending stocks of 1.977 bb (14.40% S/U), U.S. corn prices are projected by the USDA to be $3.45 /bu – down from the $3.60 /bu midpoint estimate for “current” MY 2015/16.

KSU Forecast for “Next Crop” MY 2016/17

Using recent USDA planted and harvested acres projections (see above), KSU projections are for long term trend yields for 2016 of 164.5 bu/ac, and 2016 U.S. corn production of 13.538 bb. Total use of 13.665 bb includes 5.265 bb corn use for ethanol (up 40 mb vs USDA), non-ethanol food, seed and industrial use of 1.375 bb (same as USDA), exports of 1.650 bb (down 50 mb vs USDA), and livestock feed and residual use of 5.375 bb (down 50 mb vs USDA). Following these KSU supply and use projections, ending stocks are projected to be 1.710 bb (12.51% S/U), with U.S. corn prices projected by KSU to be $3.75 /bu – up $0.30 /bu from the USDA’s early projection of $3.45 /bu for “next crop” MY 2016/17.

Potential KSU 2016 U.S. Corn “Short Crop Scenario – 13.000 Billion Bushels

If moderately significant corn production problems were to occur in the U.S. in the summer of 2016 resulting in a 13.000 bb corn (157.95 bu/ac yield on 82.300 ma harvested), then all else being equal, ending stocks for “next crop” MY 2016/17 could decline to 1.172 bb (8.5% S/U), with U.S. corn prices likely to increase to $4.50-$5.50 per bushel.

World Corn Supply-Demand

World total supplies of 1,174.75 million metric tons (mmt) are projected for “current” MY 2015/16, down marginally from 1,184.5 mmt in “old crop” MY 2014/15, but up from 1,124.1 mmt in MY 2013/14. Projected World corn ending stocks of 207.0 mmt (21.4% S/U) in “current” MY 2015/16 are up from 205.1 mmt (20.9% S/U) in “old crop” MY 2014/15, and from 174.8 mmt (18.4% S/U) in MY 2013/14.

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