Consumption Pace of Corn & Soybeans

FarmDocDaily Article

The price for corn has traded in a 25 cent range over the last two months. The price of soybeans has mostly traded within a 40 cent range. Todd Gleason explores this sideways pattern and how the pace of consumption has contributed the stable, if low, price structure.

The sideways price pattern reflects on-going expectations of adequate supplies of both crops writes Darrel Good on the FarmDocDaily website. He says there is plenty to meet consumption needs during the current marketing
year, but that the pace of consumption is continually monitored by the market to determine if those expectations should be altered.

For corn, the pace of consumption can be monitored on a weekly basis for exports and ethanol production. The pace of feed and residual use is revealed on a quarterly basis with the release of the USDA Grain Stocks reports. For soybeans, the pace of consumption can be monitored on a weekly basis for exports and on a monthly basis for the domestic crush.

The USDA now projects 2015–16 marketing year corn exports at 1.65 billion bushels. With about 28 weeks left in the marketing year exports need to run at roughly 38 million a week to make that goal. Of that 38 average, about 20 million bushels will need to be new sales, or those not already on the books. By way of example, new sales for the five weeks ended February 11 averaged 35.9 million bushels or corn per week. So, the recent pace of new sales is encouraging. And then, says Good at it relates to corn usage, there is ethanol.

Corn used for production of ethanol and co-products during the current year is projected at 5.225 billion bushels, 16 million more than consumed last year. In addition, sorghum use for ethanol production is expected to be up about 75 million bushels year-over-year. Total feedstock use, then, is expected to be up about 1.7 percent. Ethanol production during the first 5.5 months of the marketing year was about 2.4 percent larger than during the same period last year, but that margin has narrowed in recent weeks. Corn used for ethanol production during the last half of the year will be influenced by the magnitude of domestic gasoline consumption, ethanol exports, and sorghum use. Corn use for the year will likely be reasonably close to the USDA projection.

Corn consumption, then, is on target at this point with the next big piece of the puzzle to be delivered at the end of March. The quarterly Grain Stocks report will outline how much corn has been fed to livestock.

Soybean consumption is a bit easier to follow. USDA projects soybean exports of 1.69 billion bushels of which about 1.4 billion have probably shipped. It leaves around 300 bushels to ship or about 11 million bushels a week and only 2.2 million of those need to be new sales each week. While export sales can be cancelled or carried to the following year, it appears that soybean exports will reach or slightly exceed the current USDA projection thinks Darrel Good. That’s the good news side of soybean consumption. The not so friendly news comes on the domestic front. The pace of soybean consumption in the U.S. has slowed, based on numbers from the National Oilseed Processors Association. It may fall a bit short.

However, taken together, Darrel Good says the current pace of corn and soybean exports and domestic processing do not alter expectations for ample year ending stocks of both crops, supporting the continuation of a sideways price pattern.