This article provides an analysis of U.S. and World corn supply-demand factors and price prospects for both the “new crop” 2016/17 marketing year following the USDA’s April 11, 2017 USDA Crop Production and https://www.usda.gov/oce/commodity/wasde/latest.pdf reports.
Following is a summary of the article on “Corn Market Outlook in Early-May 2017″ with the full article and accompanying analysis soon to be available on the KSU AgManager website (www.AgManager.info) at the following web address:
Overview & Summary
Since the USDA’s April 11th World Agricultural Supply and Demand Estimates (WASDE) report, MAY 2017 CME corn futures have been moderately volatile – moving both higher and lower within the range of $3.54 ¼ to $3.73. “Current” MY 2016/17 U.S. corn prices have found some support at levels above local marketing loan rates because of the positive impact that low prices have had on the use of U.S. corn in ethanol production, wet corn milling, exports and to a moderate degree in livestock feeding. In addition, the February 23-24 USDA 2017 Agricultural Outlook Forum together with the March 31st Prospective Plantings report have forecast fewer U.S. corn planted acres in 2017, and with a return to trend line U.S. corn yields, lower 2017 U.S. corn production of 14.065 billion bushels (bb) versus the record highs of 15.148 bb in 2016.
However, projections of ending stocks of U.S. corn staying above 2 billion bushels (bb) coupled with ending stocks-to-use above 15% in both “current” MY 2016/17 and “next crop” MY 2017/18 has limited any significant corn futures or cash market price rallies to date in Spring 2017. IF excessive moisture conditions that have developed in the U.S. Corn Belt in late April – very early May were to continue until mid-May and significantly delay planting progress – THEN increased concerns about 2017 U.S. corn production prospects could lead to higher U.S. corn prices in late-Spring – Summer 2017.
Cash corn prices at major grain elevators in central and western Kansas ranged from $3.04 to $3.31 on Monday, May 1st. This represents a marked increase since October-December 2016 when prices had fallen below $3.00 per bushel – down to $2.66-$2.96 on December 23rd – although not as low as marketing loan rates near $2.05 (central KS) to $2.19 (western KS) per bushel. Cash corn prices in east central and northeast Kansas – near river terminal locations – were near $3.55 on May 1st, up from the range of $3.26-$3.28 per bushel on 12/23/2016. Cash corn prices at Kansas ethanol plants on May 1st ranged from $3.38 to $3.73 – indicating continuing strength in ethanol demand in Kansas and nationwide. While the “large supply and tight storage availability” situation still predominates in local Kansas grain markets, it is a positive market signal that corn usage has not declined, and that Kansas cash corn prices have enough support to have avoided falling down to USDA loan rate levels.
Other Factors Potentially Affecting the U.S. Corn Market
Other factors that could affect the U.S. corn market in 2017 include the following:
- First, the pace and timing of U.S. farmer marketing of the 2016 corn crop – much of which had been placed in storage after fall harvest and likely has been held for sale through the winter into at least early spring 2017.
- Second, anticipation of continued strong use of 2016 crop U.S. corn for domestic U.S. ethanol production and livestock feeding through spring-summer 2017.
- Third, at least moderate continued strength in U.S. corn exports – at least until what is forecast to be a sizable 2nd crop of corn from South America becomes available on global markets during Summer 2017.
- Fourth, the always present possibility of broader U.S. and Foreign economic and/or financial system disruptions that could impact grain, energy, and other commodity markets in 2017. World geo-political events have the potential to provide “shocks” to U.S. and World energy and grain markets – with the impact on the direction of U.S. and World corn markets being difficult to anticipate depending on which countries may be involved and their role in global corn export trade.
USDA Supply-Demand Forecast for “Next Crop” MY 2017/18
With early USDA projections of 2017 U.S. corn plantings of 89.996 million acres or ‘ma’ (down 4.0 ma). Harvested acres of approximately 82.4 ma (down 4.35 ma) are forecast, with projected yields of 170.7 bu/ac (vs the record high of 174.6 in 2016), leading to a 2017 U.S. corn production is forecast to be 14.065 bb – down from the record high of 15.148 bb in 2016.
The USDA forecast “next crop” MY 2017/18 total supplies to be 16.435 bb – down 505 mb from last year’s record high. Total use is forecast at 14.220 bb – down 400 mb from last year’s record high. Ending stocks are projected to be 2.215 bb (15.58% S/U) – down from 2.320 bb (15.87% S/U) in “current” MY 2016/17. United States’ corn prices are projected by the USDA to average $3.50 /bu – up from a midpoint estimate of $3.40 /bu from “current” MY 2016/17 – but within the range of $3.25-$3.55 /bu for this marketing year. This scenario is given a 55% likelihood of occurring by KSU Extension Ag Economist D. O’Brien.
Alternative KSU Forecasts for “Next Crop” MY 2017/18
Three alternative KSU-Scenarios for U.S. corn supply-demand and prices are presented for “next crop” MY 2017/18. Each forecast scenario presents the likelihood of lower U.S. corn acreage, yields and production than projected by the USDA in the February 23-24, 2017 Agricultural Outlook Forum for “next crop” MY 2017/18.
- KSU “Next Crop” MY 2017/18 Scenario #1) “167.3 bu/ac – 13.556 bb” Scenario (25% probability) assumes: 88.500 ma planted, 81.031 ma harvested, 167.3 bu/ac trend yield, 13.556 bb production, 15.926 bb total supplies, 14.185 bb total use, 1.741 bb ending stocks, 12.27% S/U, & $3.85 /bu U.S. corn average price for “next crop” MY 2017/18;
- KSU “Next Crop” MY 2017/18 Scenario #2) “165.0 bu/ac – 13.370 bb” Scenario (15% probability) assumes: 88.500 ma planted, 81.031 ma harvested, 165.0 bu/ac yield, 13.370 bb production, 15.740 bb total supplies, 14.080 bb total use, 1.660 bb ending stocks, 11.21% S/U, & $4.05 /bu U.S. corn average price for “next crop” MY 2017/18;
- KSU “Next Crop” MY 2017/18 Scenario #3) “150.0 bu/ac – 12.155 bb” Scenario (5% probability) assumes: 88.500 ma planted, 81.031 ma harvested, 150.0 bu/ac yield, 12.155 bb production, 14.525 bb total supplies, 13.460 bb total use, 1.065 bb ending stocks, 7.91% S/U, & $4.75 /bu U.S. corn average price for “next crop” MY 2017/18;
World Corn Supply-Demand
Record high World corn production of 1,053.8 million metric tons (mmt) is projected for “current” MY 2016/17, up 9.4% from 963.3 mmt in MY 2015/16, and up 3.7% from 1,016.0 mmt in MY 2014/15. Record high World corn total supplies of 1,265.6 mmt are projected for “current” MY 2016/17, up from 1,173.1 mmt in MY 2015/16, and from 1,190.8 mmt in MY 2014/15.
World corn exports of 154.4 mmt are projected for “current” MY 2016/17, up 28.7% from 120.0 mmt in MY 2015/16, and up 8.6% from 142.2 mmt in MY 2014/15. Projected record high World corn ending stocks of 223.0 mmt (21.4% S/U) in “new crop” MY 2016/17 are up from 211.8 mmt (22.0% S/U) in MY 2015/16, and from 209.8 mmt (21.4% S/U) in MY 2014/15.
- Although World corn ending stocks are projected to be a record high in “current” MY 2016/17 at 223.0 mmt, World corn percent ending stocks-to-use are forecast to actually decline marginally to 21.4%. Strong World demand for corn at low prices is expected to continue – especially in the United States, Argentina, Mexico, Southeast Asia, China, Ukraine, and other Former Soviet Union countries (less Ukraine). An ongoing, strong demand base for corn could help cause sharply increased corn market volatility in the summer of 2017 IF any serious threats emerge to the 2017 U.S. corn crop.