An analysis of U.S. and World corn supply-demand factors and 2016/17 price prospects following the USDA’s August 12, 2016 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 Late August 2016″ with the full article and accompanying analysis soon to be available on the KSU AgManager website at the following web address:
Since the USDA’s August 12th World Agricultural Supply and Demand Estimates (WASDE) report, DEC 2016 CME corn futures have trended from the close of $3.33 per bushel that day up to a high of $3.44 ¼ on August 19th, before declining to a close of $3.15 ¾ on August 30th with fall harvest approaching. The USDA’s forecast of a record large 2016 U.S. corn crop over 15 billion bushels (bb) and ending stocks of near 2.4 bb have dominated the perspective of the U.S. corn market.
Kansas Cash Corn Markets
Cash corn prices in Kansas have declined below $3.00 per bushel, but have not yet fallen to the marketing loan rate. For example, on August 31st (a.m.) cash corn prices near Salina, Kansas in the central part of the state ranged from $2.25 to $2.63 per bushel – still above the Saline County marketing loan rate of $2.05 per bushel. Similarly, cash corn prices near Garden City in southwest Kansas ranged from $2.66 to $2.72 per bushel – above the Finney County marketing loan rate of $2.19 per bushel. When fall harvest begins it will be possible that cash prices could fall to the loan rate in these areas due to lack of available storage space in these and other areas in the state of Kansas.
Other Potential Market Factors
Other market factors to consider that could affect the U.S. corn market in what remains of 2016 through mid-2017 include:
1) the pace and timing in regards to how U.S. farmers market their 2016 corn crop – much of which will be placed in storage after fall harvest,
2) anticipation of continued strong use of 2015-2016 crop U.S. corn in domestic U.S. ethanol production and livestock feeding,
3) at least moderate strength in U.S. corn exports – driven largely by a poor harvest and lack of exportable supplies in Brazil, and
4) the possibility of broader U.S. and Foreign economic and financial system disruptions impacting grain, energy, and other commodity markets – such as unanticipated U.S. financial policy announcements by the U.S. Federal Reserve affecting U.S. interest rates, or geo-political events that could “shock” World energy markets.
USDA Supply-Demand Forecast for “New Crop” MY 2016/17
With USDA projections of 2016 U.S. corn plantings of 94.148 ma (up 6.149 ma from 2015), harvested acres of 86.550 ma (up 5.801 ma from 2015), record high projected yields of 175.1 bu/ac (vs 168.4 bu/ac in 2015 and the current record high of 171.0 bu/ac in 2014), 2016 U.S. corn production is forecast to be a record high 15.153 bb – up from 13.601 bb in 2015, the current record of 14.216 bb in 2014, and 13.829 bb in 2013.
With forecast “new crop” MY 2016/17 total supplies of 16.909 bb (record high), total use of 14.500 bb (record high), and projected ending stocks of 2.409 bb (16.61% S/U) – up from 1.706 bb (12.46% S/U) in “old crop” MY 2015/16 and the highest since 4.259 bb (54.90% S/U) in MY 2004/05 – U.S. corn prices are projected by the USDA to be in the range of $2.85-$3.45 (midpoint = $3.15 /bu) – being down from the $3.60 /bu midpoint estimate for “current” MY 2015/16. This scenario is given a 20% likelihood of occurring by KSU.
KSU Forecasts for “New Crop” MY 2016/17
Three alternative KSU-Scenarios for U.S. corn supply-demand and prices are presented for “new crop” MY 2016/17, with each assuming a lower U.S. corn yields and production than the August 12th USDA WASDE report.
KSU Scenario A) “Minor Crop Problems – 14.9 bb” Scenario (35% probability) assumes: 94.148 ma planted, 86.550 ma harvested, 172.0 bu/ac yield, 14.887 bb production, 16.743 bb total supplies, 14.450 bb total use, 2.293 bb ending stocks, 15.87% S/U, & $3.25 /bu U.S. corn average price for “new crop” MY 2016/17;
KSU Scenario B) “Moderate Crop Problems – 14.5 bb” Scenario (35% probability) assumes: 94.148 ma planted, 86.550 ma harvested, 168.0 bu/ac yield, 14.540 bb production, 16.396 bb total supplies, 14.344 bb total use, 2.052 bb ending stocks, 14.31% S/U, & $3.45 /bu U.S. corn average price for “new crop” MY 2016/17;
KSU Scenario C) “More Serious Crop Problems – 14.2 bb” Scenario (10% probability) assumes: 94.148 ma planted, 86.550 ma harvested, 164.0 bu/ac yield, 14.194 bb production, 16.137 bb total supplies, 14.239 bb total use, 1.898 bb ending stocks, 13.33% S/U, & $3.60 /bu U.S. corn average price for “new crop” MY 2016/17;
World Corn Supply-Demand
World corn production of 1,028.4 million metric tons (mmt) is projected for “new crop” MY 2016/17, up from 959.7 mmt in “old crop” MY 2015/16, and up from 1,013.6 mmt in MY 2014/15.
World corn total supplies of 1,237.7 mmt are projected for “new crop” MY 2016/17, up from 1,170.0 mmt in “old crop” MY 2015/16, and up from 1,188.9 mmt in MY 2014/15. World corn exports of 137.25 mmt are projected for “new crop” MY 2016/17, up from 119.7 mmt in “old crop” MY 2015/16, but down from 141.7 mmt in MY 2014/15. Projected World corn ending stocks of 220.8 mmt (21.7% S/U) in “new crop” MY 2016/17 are up from 209.3 mmt (21.9% S/U) in “old crop” MY 2015/16, and from 208.3 mmt (21.2% S/U) in MY 2014/15.
Brazilian Corn Production in 2016
Brazilian corn production in MY 2015/16 (produced in early-mid 2016) is estimated to be 68.5 mmt, down 16.5 mmt (down 19.5%) from MY 2014/15. This shortfall in Brazilian corn production in 2016 has provided some support for U.S. corn exports and even ethanol production (via exports). But expectations of a record large 2016 U.S. corn crop have had a predominant negative impact on U.S. corn prices. Brazilian corn production is forecast by the USDA to rebound back to 80 mmt in MY 2016/17 (2017 production).