Supply and Demand Move Higher (7/12/16)

Chad Hart, ISU Extension Grain Marketing Economist, provides a summary of the latest USDA reports.

Hart_Chad-thumbThe July updates from USDA pushed both crop supplies and demands higher. But in the longer run, stock levels are projected to be higher, with steady to lower prices. On the supply side, the revised acreage and stock numbers from last month were fully incorporated into the projections. Corn production was increased by 110 million bushels, while soybean production rose by 80 million.

On the demand side, there were several offsetting moves. For corn in both old and new crop settings, feed and ethanol usage were lowered, while food and export usage rose. For soybeans, export demand was increased for both old and new crop. Crush demand was lifted slightly for the new crop, but seed and other uses were lowered for the old crop. Putting all of the shifts together results in slightly lower old crop ending stocks, but higher new crop (2016/17) stocks.

Season-average prices were held steady for soybeans, at $9.05 for the 2015/16 crop and $9.50 for the 2016/17 crop. Corn season-average prices were reduced by 5 cents on the 2015/16 crop to $3.65 per bushel and by 10 cents on the 2016/17 crop to $3.40 per bushel.

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Positive Demand News from USDA (6/10/16)

Chad Hart, ISU Extension Grain Marketing Economist, provides a summary of the latest USDA reports.

Hart_Chad-thumbUSDA’s June updates contained good news on the demand front for corn and soybeans. International demand continues to strengthen, while domestic usage holds steady. With no major changes on the supply side, this implies lower ending stocks and projections of higher prices. Starting with corn, the losses and delays in the South American harvest have opened up some off-season selling opportunities for the U.S. Old crop (2015/16) exports were raised 100 million bushels as a result. Although corn imports were increased slightly, the overall impact for old crop corn is a 95 million drop in ending stocks and a 10 cent increase in the season-average price to $3.70 per bushel. That drop in ending stocks, combined with another increase in new crop (2016/17) exports of 50 million bushels, lowered new crop ending stocks by 145 million bushels. The changes added 15 cents to the new crop corn season-average price estimate, raising it to $3.50 per bushel.

For soybeans, both old crop domestic and international demand were on the upswing. Crush added 10 million bushels, while exports grew by 20 million bushels. With the 30 million bushel drop in old crop ending stocks, USDA raised its 2015/16 season-average price by 20 cents to $9.05 per bushel. As with corn, the export demand increase extended into the new crop as well, adding another 15 million bushels. That pushed new crop ending stocks below 300 million bushels and lifted the 2016/17 season-average price estimate by 40 cents, to $9.50 per bushel.

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April Demand Update (4/12/16)

Chad Hart, ISU Extension Grain Marketing Economist, provides a summary of the latest USDA reports.

Hart_Chad-thumbThe World Ag Supply and Demand Estimates update for April contained some modest changes for the crop balance sheets. For U.S. soybeans, the only changes were a 15 million bushel bump in export demand and a slight decline in seed demand, based on last month’s Prospective Plantings report. Projected soybean ending stocks were lowered to 445 million bushels, but the midpoint of the 2015/16 season-average price range remains steady at $8.75 per bushel. For U.S. corn, the adjustments were mixed. Feed demand was reduced 50 million bushels, based on the quarterly disappearance pattern from the Grain Stocks report. Corn usage for ethanol was increased 25 million bushels as ethanol production has held near record levels over the 1st three months of the calendar year. Thus, corn ending stocks were raised 25 million bushels and the midpoint of the 2015/16 season-average price range fell 5 cents to $3.55 per bushel.

World corn production for 2015/16 was increased by 3 million metric tons, with 1 million of that going to increased imports for Mexico and Southeast Asia and 2 million projected to be held in stock. China’s feed usage of corn is projected to rise by 2 million metric tons, but that increase is expected to be met by drawing down existing internal stocks. World soybean production for 2015/16 was lowered slightly as declines in Chinese and Indian production offset an increase from Argentina. Global soybean trade was raised, based on stronger exports to China, Japan, and Mexico.

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Plans for a Whole Lot of Corn (3/31/16)

Chad Hart, ISU Extension Grain Marketing Economist, provides a summary of the latest USDA reports.

Hart_Chad-thumbThe end of March is an active time for the crop markets and USDA. It’s when we get our first look at the 2016 crop year from the producers’ perspective with the release of USDA’s Prospective Plantings report. We also receive an update on demand via USDA’s Grain Stocks report. And as we typically see, these reports contained a few surprises to mull over as planting approaches, mainly for new crop prospects. Starting with the stocks/demand picture, the trade estimates going into the stocks report were fairly close to the USDA numbers. As of March 1, 7.81 billion bushels of corn were being held in storage. That’s 1% higher than last year at this time. Quarterly corn disappearance for the December-February time frame was 3.43 billion bushels, slightly lower than last year. Overall corn demand and usage has been relatively stable. Soybean stocks came in at 1.5 billion bushels, up 15% from last year. That is the highest soybean stock number for March since the 2006/07 crop. Quarterly soybean disappearance for the December-February time frame was 1.18 billion bushels, 1% lower than last year.  So the build-up of soybean stocks has more to do with supply than demand. In total, old crop usage turned up to be in-line with expectations.

That’s not the case with plantings and the potential for new crop production. The biggest discrepancies between trade expectations and the planting report were for corn and wheat. Projected corn plantings came in at 93.6 million acres. The trade expectation was roughly 90 million. So prospective corn plantings are 3.6 million above expectations and 5.6 million above last year. Meanwhile, projected wheat area dropped to 49.6 million acres, roughly 2 million below expectations and 5 million below last year. Soybean planted area was also down to 82.2 million acres, which was 800,000 less than expectations and 450,000 below last year. Looking at specific state projections, the boost in corn area is coming mostly from the Great Plains and Corn Belt. The largest moves are in Kansas and North Dakota, adding 650,000 acres each, as traditional wheat area heads to corn production. Illinois and Iowa are adding 400,000 corn acres each this year. Out of the 48 states listed in the corn table, only 7 are projected to have fewer corn acres than last year, with the largest reduction being 20,000 acres. The soybean planting story hinges mainly on Missouri. Missouri farmers indicated they would plant nearly one million more acres of soybeans this year, following the planting issues they had last year. Illinois and North Dakota are projected to gain significant soybean area as well.  However, many states (including Iowa) are projected to lower soybean plantings. Iowa and 9 other states are set to reduce soybean plantings by at least 100,000 acres each. Hence, despite the strong surge in area from Missouri, the national soybean planting area is projected to decline.

Given trend yields of 168 bushels per acre for corn and 46.7 bushels per acre for soybeans, the projected acreage points to another round of massive crops. Corn production would reach 14.38 billion bushels, which would be another record corn crop. Soybean production would approach 3.8 billion bushels, which would be the 3rd largest soybean crop in history. And for markets already dealing with large supplies, these prospective plantings do not help. So the markets will be looking for Mother Nature to slow the supply train down.

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