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USDA Surprises Drive Corn Prices Higher

original farmdoc Daily article

by Todd Hubbs, ILLINOIS Extension

The Acreage and Grain Stocks reports, released on June 30, produced some surprises for the corn market. The drop in acreage spurred a rally in corn prices and injected some optimism into the corn outlook moving into the 2020 marketing year. The market turns to weather forecasts and the upcoming WASDE report for price formation over the short term.




Corn producers reported they planted or intended to plant 92.01 million acres of corn this year, 2.31 million more than planted in 2019. Corn planted acres came in 3.2 million acres lower than the average trade guess and 4.98 million acres smaller than March planting intentions. Compared to March planting intentions in major producing states, the June survey revealed lower corn acres in all states. In particular, the western Corn Belt saw substantial acreage reductions with North Dakota (800,000 acres), South Dakota (600,000), and Nebraska (700,000) leading the way. The eastern Corn Belt saw one million acres of corn dropped from March intentions with Illinois and Indiana at 400 thousand acres each. The five million acres drop in corn acres did not move into other principal crops and hints at expanded prevent plant acreage for corn this year.

Producer intentions to plant principal crop acreage show a 9.3 million acre increase from 2019. The USDA estimates that acreage planted to principal crops will total 311.9 million acres. The planned increase in total planted acreage from a year ago came from increases in feed grains and soybeans. Sorghum acreage came in 355,000 acres higher than a year ago at 5.62 million acres. Barley and oats increased by 76,000 and 324,000 acres, respectively. Soybean planting intentions indicated farmers plan to plant 83.8 million acres of soybeans, up 7.7 million acres from 2019. The soybean acreage came in at the low end of market expectations. An additional 2.24 million acres of corn remain unplanted at the time of the survey and brings into question whether those acres may end up in alternative crops or unplanted. The surprise in corn planted acreage led to a strong rally in corn prices. The market’s focus now turns to demand and weather.

While the Acreage report revealed a positive surprise for corn prices, the June 1 stocks report came in much higher than expected. June 1 corn stocks came in at 5.224 billion bushels, slightly higher than last year and about 273 million bushels larger than the average trade guess. The higher than expected stocks total revealed a lower level of feed use in the third quarter of the marketing year. Feed and residual use during the first three quarters of the marketing year sits at 4.729 billion bushels. To reach the projected 5.7 billion bushels of corn, the USDA projects for feed and residual during this marketing year, feed and residual use in the fourth quarter must equal 971 million bushels. Fourth quarter feed and residual use has not equaled that level since the 2005–06 marketing year. Based on current stocks estimate, it appears feed and residual use this year may not reach the projection of 5.7 billion bushels and may see the USDA lower the estimate in the next WASDE report on July 10.

A lower feed and residual amount points toward a larger carry out into the next marketing year. The potential for the current marketing year ending stocks eclipsing 2.2 billion bushels, while not sure, looks high. Ethanol production continues to recover from the weakness seen in April and May. Corn use for ethanol in the third quarter totaled 955 million bushels, down 387 million bushels from the third quarter of the last marketing year. For the week ending June 26, ethanol production came in at 900 thousand barrels a day, up almost 18 percent from a month ago. The recent uptick in Covid–19 cases and subsequent policies enacted around the country to fight the spread insert a considerable level of uncertainty into ethanol use projections. Corn use for ethanol may flatten out as the virus’s resurgence mitigates economic activity during the peak driving season and may carry over into the next marketing year. An expectation of USDA lowering corn use for ethanol by 50 million bushels in the next WASDE report seems reasonable.

Corn exports appear on track to hit the USDA estimate of 1.775 billion bushels for the current marketing year. Outstanding sales as of June 25 sit at 332 million bushels. Exports through June 25 for the marketing year total near 1.38 billion bushels. While the export pace sits slightly below the USDA estimate, some light Chinese buying and strong domestic prices in Brazil hold positives for corn exports. Higher corn prices and the potential for slow global growth may prevent an acceleration of exports as the calendar moves into the next marketing year.

A higher carry out, despite lower acreage, places an added emphasis on yield potential. Some dryness in major corn-producing areas looks feasible over the near term. The recent drought monitor showed areas in North Dakota, Illinois, and Indiana poised to come under stress if dryness continues. The overall impact on the crop is challenging to predict now. An extended dry period as the early-planted crop moves into pollination will push corn yields lower. The projection for harvested corn acres sits at 84 million acres, 2.7 million more than harvested in 2019. If USDA’s yield projection of 178.5 comes to fruition, corn production comes in near 15.0 billion bushels with the present acreage intentions, up around 1.37 billion bushels from 2019.

Corn prices already reflect lower acreage and weaker demand. Subsequent rallies in corn prices rely on the weather. The prospect of the market building a weather premium seems high over the next week given the current weather forecast.

July WASDE to Reflect Tariffs

This Thursday’s USDA’s monthly supply and demand estimates will include the impact of the Trump Administration’s tariffs. Gary Crawford talks with the chair of the World Agricultural Outlook Board Seth Meyer about the July WASDE. The report is scheduled for release at 11 a.m. central time Thursday, July 12, 2018.

Market Outlook for Corn and Soybeans


Farmers, as we enter the last half of May, are nearing the end of the spring planting season and they are turning their attention again to the marketplace. Todd Gleason has more on how one agricultural economist sees prices playing out for the year.

We’ll start with the last numbers USDA publishes in the Supply and Demand tables for each commodity, the season’s average price. For corn, that number - at the midpoint - is $3.80. University of Illinois Agricultural Economist Todd Hubbs is a bit more optimistic. He has it at $4.05. His soybean price, however, is less than USDA’s. The agency has it at $10.00 a bushel. Hubbs puts it at $9.45. The difference in viewpoint says Hubbs lands squarely on soybean exports, “When we look forward to 18/19 the 2.29 billion bushel USDA projection seems a bit high especially when you consider the size of the Brazilian soybean crop and China’s aspiration to increase domestic soybean production while cutting back on imports for the first time in over a decade. It is unclear if China can pull this off, but I’ve got exports at 2.20 billion bushels in 18/19 and that may be generous considering whats going on currently in the market.”



So, Todd Hubbs soybean export figure is 90 million bushels lower than USDA’s for the coming marketing season. It’s lower for the current marketing year, too. All-in-all his soybean supply & demand table puts the new crop ending stocks at 562 million bushels. That’s a far cry from the much more optimistic USDA 415 million bushels projection and the reason his price projection is 55 cents a bushel lower than USDA’s. Again USDA is $10.00, Hubbs is at $9.45. His corn number swings in the opposite direction.

USDA, in the May reports, projected the price of new crop corn at $3.80. Hubbs is at $4.05. The reason why is pretty simple. Hubbs says he uses a lower yield trend line yield, "The main difference between my projections and USDA is the trend yield number. We sit at 171.4 whereas USDA has it a 174 bushels to the acre and the final yield makes a big difference in the consumption pattern and the final price.



Again, USDA is at 174 bushels to the acre and Todd Hubbs is using 171.4. Both numbers are calculated from the same USDA yield data set. USDA uses a smaller subset starting at about the time Bt corn was introduced. Hubbs’ set goes back a couple more decades, and consequently, his yield number is lower. The resulting price difference in the supply & demand tables for new crop corn is $3.80 for USDA and $4.05 for Hubbs.

May 10 | USDA WASDE ReAct with Todd Hubbs

The monthly WASDE report for May 2018 introduced the first look at the new crop corn and soybean supply & demand tables. Todd Gleason has more with University of Illinois commodity markets specialist Todd Hubbs.







Corn Use for Ethanol Update


University of Illinois Commodity Markets Specialist Todd Hubbs discusses prospects for the ethanol exports to Brazil and China with Extension Farm Broadcaster Todd Gleason.

by Todd Hubbs, University of Illinois
farmdocDaily article

The recent strength in ethanol production has led to speculation about changes to USDA’s estimate of corn used for ethanol in the pending WASDE report. Ethanol production for the week ending December 1 set a new ethanol production record with an average of 1.108 million barrels per day, continuing eight consecutive weeks of more than a million barrels a day of production. Currently, the WASDE forecast for corn consumption for ethanol production is 5.475 billion bushels, up 36 million bushels from 2016–17 marketing year estimates. The ability to surpass this projection is possible, but foreign demand for ethanol will be crucial as we move into 2018.

Domestic ethanol consumption is influenced by domestic gasoline consumption, due to the ethanol blending requirement, and the biofuels volume requirement associated with the Renewable Fuels Standard. The EPA final rulemaking for the Renewable Fuels Standard for 2018 was released on November 30. The renewable fuels volume requirement is set at 19.29 billion gallons for 2018, up slightly from the 19.28 billion gallons required in 2017. The conventional ethanol requirement is set at 15 billion gallons for 2018, the same as in 2017 and equal to the statutory requirement level. If the gasoline consumption forecast used by the EPA is correct, the E–10 blend wall will be near 14.3 billion gallons in 2018. The EPA believes an ethanol supply of 15 billion gallons is reasonably attainable in 2018 with a total domestic capacity of 16 billion gallons. Since the ethanol blending requirements did not change, the possibility for greater corn usage in 2018 due to blending is low unless gasoline consumption increases beyond current expectations.

According to the most recent Energy Information Agency (EIA) Short Term Energy Outlook, U.S. retail gasoline price is projected to average $2.45 per gallon in 2018, an increase of five cents from the current expected price in 2017. Despite the projection of higher gasoline prices, gasoline consumption is forecast at 143.27 billion gallons in 2018. The 2018 gasoline consumption projection is up from the 143.03 billion gallons projected for consumption in 2017. EIA’s forecast of ethanol production is set at 1.04 million barrels per day. If the EIA projection is correct, approximately 15.9 billion gallons of ethanol will be produced in 2018. To exceed the current USDA projections for corn use in ethanol, exports need to repeat the impressive performance of the 2016–17 marketing year.

Ethanol export numbers are available from U.S. Census trade data for 2017 through October. For the 2017 calendar year, U.S. exports of ethanol are at 1.09 billion gallons, up almost 16.6 percent from the similar period in 2016. A note of caution is warranted when considering ethanol exports in the current marketing year. During the first two months of this marketing year, ethanol exports are down 19 percent from previous marketing year levels. The large reduction is due to drastically lower export levels to Brazil and China. Chinese imports of U.S. ethanol are minimal thus far in the marketing year. Brazilian ethanol imports from the U.S. are down 49 percent from last year for the first two months. During the 2016–17 marketing year, U.S. ethanol exports totaled 1.37 billion gallons, with exports to Brazil comprising 36.5 percent of the total. The imposition of the 20 percent tariff rate quota on Brazilian ethanol imports on September 4 is curtailing Brazilian imports. The tariff becomes active at export levels greater than 150 million liters per quarter (39.6 million gallons) and restarted in December. U.S. ethanol exports will require increases in other markets to meet or exceed the export levels attained during the 2016–17 marketing year.

Corn consumption levels for ethanol production during this marketing year is provided in the USDA Grain Crushing and Co-Product Production report. Grain crushing for fuel alcohol is available through October. For the first two months of the marketing year, 915.6 million bushels of corn has been processed for ethanol. The grain crush is up 2.8 percent from 2016–17 marketing year processing numbers over the same period. Using EIA weekly ethanol production numbers, November ethanol production averaged over 1 million barrels per day. These production levels place corn use for ethanol production in a range of 555 to 565 million bushels for the month. With a conservative estimate of corn crush in November, total corn consumption for ethanol production through the first quarter of the marketing year would be well above the current WASDE projection. While this is an encouraging sign for corn use, ethanol stocks have risen for five consecutive weeks to reach 22.5 million barrels as of December 1, a level not attained since June. During the same period last year, ethanol stocks fell around 700,000 barrels under strong export demand.

The December WASDE report may increase the corn use in ethanol projection due to the strong production during the first quarter of the marketing year. Lower ethanol export totals and growing ethanol stocks may create a wait and see scenario. Another strong year of ethanol production is highly likely, but flat projections for gasoline consumption and lower ethanol export levels may limit growth over last marketing year’s performance.

Todd Hubbs Review August Crop Reports

Excerpt from August USDA Crop Production report.

Corn production is forecast at 14.2 billion bushels, down 7 percent from last year. Based on conditions as of August 1, yields are expected to average 169.5 bushels per acre, down 5.1 bushels from 2016. If realized, this will be the third highest yield and production on record for the United States. Area harvested for grain is forecast at 83.5 million acres, unchanged from the June forecast but down 4 percent from 2016.

Soybean production is forecast at 4.38 billion bushels, up 2 percent from last year. Based on August 1 conditions, yields are expected to average 49.4 bushels per acre, down 2.7 bushels from last year. Area for harvest in the United States is forecast at a record high 88.7 million acres, unchanged from the June forecast but up 7 percent from 2016. Planted area for the Nation is estimated at a record high 89.5 million acres, also unchanged from June.

All wheat production, at 1.74 billion bushels, is down 1 percent from the July forecast and down 25 percent from 2016. Based on August 1 conditions, the United States yield is forecast at 45.6 bushels per acre, down 0.6 bushel from last month and down 7 bushels from last year.







...see USDA Reports page for more complete detail.

farmdocDaily Webinar | USDA March Grain Stocks & Acreage


Darrel Good, Todd Hubbs, Scott Irwin - University of Illinois ACES



by Todd Hubbs, Agricultural Economist - University of Illinois

The high March 1 stock numbers provide some bearish sentiment for old crop corn and soybean prices in 2017. The larger than expected soybean stock number may have some implications for the size of the 2016 soybean crop, but the final estimate will not be known until September. The large corn stocks number impact the consumption of corn in the feed and residual category directly during the current marketing year and an expectation of reduced feed and residual use is prudent moving forward. Planting intentions confirmed the belief that farmers would switch to soybean production in 2017.


The large Brazilian soybean crop this year combined with stable demand over the next marketing year gives an indication of lower prices for soybeans next marketing year. The lower corn planting intentions provide some support for corn prices despite the large March 1 stock estimate. If consumption maintains its current pace, the 2017–18 marketing year should see stable to higher corn prices.



USDA January Reports | an interview with Todd Hubbs

University of Illinois commodity grains analysts Todd Hubbs discusses the January 12th USDA reports including Crop Production, Grain Stocks, and WASDE.








USDA October Reports



University of Illinois Agricultural Economist Darrel Good reviews the October 12, 2016 Crop Production and WASDE reports including his thoughts on how it changes off-farm storage decisions.

Not Much Chance USDA Will Change Corn Yield or Acreage

Early corn yield reports have been good, but pretty variable. There are more than few concerns about a disease called diplodia, too. Some are beginning to piece these items together to make a case for USDA to lower its corn yield estimate. This isn’t very likely thinks University of Illinois Agricultural Economist Darrel Good.

“The fact is”, says Darrel Good, “if you look at the last 20 years of history, there is a strong tendency of the corn yield estimate to get higher in January compared to what it was in September. This has happened 70% of the time in the last 20 years, and almost 70% of the time in the last 40 years. So, those looking for a lower estimate are bucking history, but you can’t rule it out.”

Maybe not, but even if the USDA yield changes it won’t be by much thinks Darrel Good. Certainly not enough to really alter the supply/demand balance sheet changing it from a surplus to a tight supply situation. He doesn’t expect USDA to change the acreage numbers much either. This is because the difference between the Farm Service Agency reported acreage figures released in August and then again in September was very small.

This tells Darrel Good reporting has occurred in a very timely fashion. Therefore, he doesn’t look for an FSA increase in subsequent reports. Historically when the dust settles on corn, NASS acreage is three to three-and-a-half percent higher than FSA, says the U of I number cruncher, and about two percent higher on soybeans. This is right in the range where the FSA numbers set today.

Consequently, Darrel Good does not expect NASS to change its corn acreage estimate very much going forward. If this is the case, it leaves the U.S. with record corn yield and production figures.

USDA Reports | September 12, 2016

USDA Crop Production and WASDE reports released 11am central Monday September 12, 2016. Visit our USDA Reports page for full details.


Corn production is forecast at 15.1 billion bushels, up 11 percent from last year but down less than one percent from the August forecast. Based on conditions as of September 1, yields are expected to average 174.4 bushels per acre, down 0.7 bushel from the August forecast but up 6 bushels from 2015. If realized, this will be the highest yield and production on record for the United States. Area harvested for grain is forecast at 86.6 million acres, unchanged from the August forecast, but up 7 percent from 2015.

Soybean production is forecast at a record 4.20 billion bushels, up 3 percent from August and up 7 percent from last year. Based on September 1 conditions, yields are expected to average a record 50.6 bushels per acre, up 1.7 bushels from last month and up 2.6 bushels from last year. Area for harvest in the United States is forecast at a record 83.0 million acres, unchanged from August but up 1 percent from 2015.

Selected States Yield

CORN
Aug    Sep     State
200.0  200.0  Illinois
187.0  185.0  Indiana
198.0  196.0  Iowa
184.0  184.0  Minnesota
187.0  184.0  Nebraska
145.0  151.0  Kansas
163.0  162.0  Ohio
147.0  142.0  South Dakota
135.0  135.0  North Dakota

SOYBEAN
Aug    Sep     State
 57.0   61.0    Illinois
 55.0   58.0    Indiana
 57.0   58.0    Iowa
 47.0   49.0    Minnesota
 59.0   59.0    Nebraska
 40.0   44.0    Kansas
 52.0   53.0    Ohio
 42.0   43.0    South Dakota
 33.0   35.0    North Dakota

WASDE a Shade Friendly

USDA’s March World Agricultural Supply and Demand Estimates report didn’t really change much, still that seems a shade friendlier than before to University of Illinois Agricultural Economist Darrel Good.

The Corn Crop is Unlikely to be Overestimated

After the Crop Production report was released last week some of the trade began to discuss the possibility USDA had overestimated the size of the U.S. corn crop. This is not very likely.

USDA’s October 9 Crop Production report forecast the 2015 corn crop at about 13.6 billion bushels. That was down 30 million bushels from September and 660 million bushels smaller than last year.

Commentary following the release of the report suggests some believe the corn crop is even smaller. One of the factors cited as evidence the crop may be smaller than forecast is the strong basis levels in many markets. This seems the make some sense. The argument is that a crop as large as forecast, particularly in the face of a rapid pace of harvest and a large soybean crop, would not support such a strong basis due to the resulting strong demand for storage space. That argument, however, is not completely supported by the current estimates of crop supplies thinks University of Illinois Agricultural Economist Darrel Good.

Basis levels are generally determined by the supply of storage space and an array of factors that determine the demand for storage capacity. Harvest-time basis levels at the point of producer delivery may be receiving some additional support this year from the recent expansion in grain storage capacity. The USDA’s December Grain Stocks report, for example, estimates that permanent storage capacity (on- and off- farm) increased by nearly 550 million bushels from December 1, 2012 to December 1, 2014.

Additional capacity has been added in the past year. Basis levels at the farm may also be receiving support from the lack of widespread transportation delays and the increasing use of delayed pricing contracts. Both of these factors allow for more rapid movement of corn through the marketing channel. Darrel Good says the lack of widespread transportation issues may reflect, in part, the dominance of the domestic corn market relative to exports resulting in a larger portion of the crop moving by truck rather than by rail where delays are more common.

Basis levels are also influenced by the pace of corn consumption. A more rapid pace of consumption, all else equal, tends to strengthen basis in order to make storage less attractive. Domestic ethanol production in September and early October 2015 was nearly five percent larger than that of a year earlier, supporting the domestic demand for corn. Domestic feed demand for corn has also likely been supported by the four percent increase in the hog inventory this fall and the slightly larger number of cattle on feed, dairy cattle, and broiler placements. On the other hand, the pace of export shipments is well below that of last year. The relative pace of consumption in the various segments of the corn market may explain part of the regional differences in basis patterns this year.

Since corn basis levels and patterns are determined by a complex set of supply and demand factors, it seems to be a stretch to conclude generally strong harvest time basis levels this year point to a smaller corn crop than currently forecast writes Good in his Weekly Outlook. It can be found on the Farm Doc Daily website.

He says history is also not on the side of a smaller yield forecast than the 168 bushel forecast of last week. In the 40 years from 1975 through 2014, the USDA yield forecast increased from September to October, as it did this year, in 24 years. The January yield estimate was below the October forecast in only four of those 24 years. While higher corn prices as the marketing year progresses are possible, then, price increases are not likely to be generated by a smaller U.S. production forecast. Instead, Darrel Good says prices will be influenced by the pace of consumption and the development of the South American crop.

Darrel Good Sep 11 USDA Report Reaction

This morning (Friday) USDA updated crop production numbers for corn and soybeans. Todd Gleason discussed the report with University of Illinois Agricultural Economist Darrel Good.

Perspective for the Soybean Market

We’ll know a lot more about where the price of soybeans is headed at the end of this month. Still, it is useful to understand how price arrived where it is today.

Last fall USDA projected there would be about 475 million bushels of soybeans leftover by the close of the marketing year. That’s this fall. The agency has trimmed that number back over time. This month the target is 330 million bushels.

Usage has been really strong and it is important to remember says University of Illinois Ag Economist Darrel Good, but it did not change the balance sheet very much in this one month. Over time it has, however, been really supportive to the price of soybeans - keeping them above $9 a bushel on the board. Demand has held the bottom end of the market.

Supply, in the coming marketing year on-the-other-hand, is the problem at hand. The June 30th Acreage report is supposed to help clarify this matter. The spring rains, especially in Kansas and Missouri, may cause that not to happen says Good.

Quote Summary - The June acreage report will be interesting this year, for those two states and maybe more, because it will in fact still reflect some intentions for those acres not planted at survey time. How will producers report those intentions? Are they still planning to plant all the soybean acres if it dries out? Or have they already made a decision to abandon and go to prevent plant? So, even after the June number is released, uncertainty about acreage will remain. It will make the August and September FSA Prevent Plant acreage reports an important way to tweak the June number.

A tweak of three to five million acres of prevent plant for soybeans, thinks Darrel Good, would be enough to change the balance, shifting the overwhelming supply of soybeans that so far appears to be coming - consequently now pegged at 475 million bushels just like last year - to something far more supportive of price.

Why USDA Lowered the Corn for Ethanol Number

This week (June 10th) USDA lowered its estimate of how many bushels of corn would be used to make ethanol. It surprised the market. However, there is an explanation.

Once a month the United States Department of Agriculture releases a report predicting how corn will be used in several different categories; how much will be fed to livestock, how much will be exported, and how much will be used to make the gasoline additive ethanol. This month it dropped the number of bushels of corn to make ethanol by 25 million. It’s still a big number at 5.175 billion bushels, but the trade didn’t like it. University of Illinois ag economist Darrel Good says it may mean less than the surprise it gave the trade. This, he says, is because the number is calculated in a new way.

Quote Summary - USDA sited its new Grain Crushings and Co-Products Production survey instituted last fall. It shows the number of bushels of corn being consumed to produce ethanol isn’t as large as previously forecast. This suggests the efficiency of ethanol production has in fact increased. So, there is a situation where ethanol production is up four-percent year-over-year, but USDA is only projecting a one-percent increase in corn use. This is because of the new survey data.

Consequently, the new data caused USDA to raise the estimated number of bushels leftover from this market year to go up by 25 million bushels. The increase did not surprise the marketplace. It was looking for a 25 million bushel increase. It just didn’t come from the place it thought it would says Darrel Good.

Quote Summary - They were looking for a lower feed and residual number, not a lower ethanol number.

The trade had dialed in a lower feed and residual category number based on bird flu, the number of turkeys and chickens euthanized because of avian influenza, and therefore no longer consuming corn. This may still show up in the end of the month Grain Stocks report. Even then, it may not be clear thinks Good. Historically, the numbers in the June Grain Stocks report have been noisy.

Quote Summary - It is pretty noisy. The June report in recent years has had some big surprises. We just never know the direction of the surprise. The market needs to be aware of that. The market, at this juncture, seems to be thinking the feed demand is a little weaker than what USDA has projected.

This year USDA has a better corn for ethanol number than in the past, though it doesn’t quite fit with trade perception. They’ll need to adjust. The June Grain Stocks report isn’t likely to help. The feed and residual category, which the trade expects to be smaller, is just an educated guess and includes a big buffer - the residual part of the name.

USDA WASE May 2015 Numbers



University of Illinois Ag Economist John Newton discusses the May 2015 World Agricultural Supply and Demand Estimate report numbers for new and old crop corn and soybeans.

April WASDE Big for Corn

The March 31 USDA reports resolved some questions for the corn market, but left a couple of items hanging. The April 9 supply and demand tables will give the report some true balance.



Most traders saw last week’s USDA reports as a bad sign for the price of corn. The acreage figure was on the high end of trade expectations and the grain stocks number appears to show a slower than estimated pace of consumption. University of Illinois Ag Economist Darrel Good has a different take.
Quote Summary - Taken at face value the corn stocks number implies less feed and residual usage during the first half of the marketing year than the trade expected. It is about 69 percent of USDA’s projection for the year, 5.3 billion bushels. Over the last four years the first half feed use has been 74 percent and if the market assumes the actual uses is factually 74 percent then the 5.3 billion is not reachable.
However, Darrel Good goes on, if you look at the history prior to the past four years, which he considers anomalous, first half feed usage averaged something between 65 and 68 percent - not 74 percent .
Quote Summary - If we are on that path this year, then 5.3 billion bushels is still reachable, and we might do even more given the expansion in livestock numbers. Broiler numbers are up 3 to 4 percent. The winter pig crop is 7 percent larger than last year. It mens core feed demand should be very robust the last half of the marketing year.
Clearly says the ILLINOIS ag economist the market did not interpret USDA’s Grain Stocks report in this fashion. It, he says, likely expects the April 9 WASDE estimates to show a lower feed usage number and consequently an increase in the year ending stocks for corn.
Quote Summary - Personally, I wouldn’t be surprised if the WASDE number is a bit lower in the April report. They may come down 100 million bushels on the feed and residual use projection and put all of that into the projected year ending stocks number. I think that is the way the market is leaning. Unfortunately, we won’t get another real read on that until we get the June Grain Stocks report three months from now.
Between now and then the trade will mostly forget about old crop corn feed usage as it concentrates more energy on divining how the 2015 corn harvest will affect the price of corn.

Reviewing the Pace of Corn & Soybean Exports

Following the January 12 USDA Crop Production and Grain Stocks reports it has becoming increasingly clear that the story in the corn and soybean markets for the foreseeable future will be the ongoing pace of consumption.



Consumption of corn produced in the United States can be tallied as corn for used for ethanol, fed to livestock, or exported. The soybean consumption numbers are derived from an item called the crush… that’s when a soybean facility crushes the bean to extract the oil and meal from it. There is also the feed and residual number, and again exports. University of Illinois Ag Economist John Newton has explored the export numbers.

He says, holding all else constant, a lower rate of corn and soybean exports relative to current USDA projections would increase carryover stocks, and could produce downward pressure on prices. USDA, as of the January reports, expects corn exports will be 1.75 billion or 1750 million bushels for the current marketing year. Newton also says right now the actual numbers suggest corn exports will need to pick up to make it to seventeen-fifty.
With nearly 40 percent of the marketing year in the books, corn exports need to accelerate in order to reach the 1,750 million bushel WASDE projection. Based on the implied GATS estimate of 602 million bushels, 1,148 million bushels need to be exported during the remainder of the marketing year to reach the WASDE projection. On a weekly basis this total represents approximately 37 million bushels per week, and would require an increase of 57 percent over the current 10-week average export volume.
Again, in order to meet the USDA projected yearly exports total of 1.750 billion bushels the pace of corn exports needs to average 37 million bushels per week from mid-January forward. Using a similar set of calculations John Newton reports cumulative soybean exports for the 2014/15 marketing year total 1.312 billion bushels, up 18 percent from last year.
Based on the FGIS totals, then, to reach the 1,770 million bushel WASDE projection it’s implied that 458 million bushels of soybeans need to be exported during the remainder of the marketing year. On a weekly basis this total represents approximately 15 million bushels per week.
While corn exports are accelerating, the pace of soybean exports from U.S. ports is slowing down. Combining the outstanding sales with the remaining balance needed, Newton expects sales could come up 42 million bushels short of the WASDE projection. He thinks soybean exports will struggle to meet the lofty 1.77 billion bushel USDA estimate, but that it is entirely possible.

Issues Stemming from January USDA Report

The final 2014 crop production numbers delivered by USDA in the January reports leave three issue unresolved.

The three problems, as identified by University of Illinois Ag Economist Darrel Good, center on the number of corn and soybean acres planted, the surprisingly small amount of corn used in the first three months of the marketing year, and the surprisingly large number of soybeans consumed in that same timeframe.

The difference between the total number of planted acres USDA NASS has reported over time and those officially reported by farmers to FSA , USDA’s Farm Service Agency, has grown. The number of acres planted to wheat, corn, and soybeans as tallied by USDA NASS has steadily grown larger than the number of acres farmers are telling FSA they’ve sown. USDA has not offered an explanation. The difference in 2014 is nearly 9.3 million acres over the three crops says Darrel Good.
He says the changing relationship between NASS acreage estimates and acreage reported to FSA may make early FSA reports less useful in anticipating NASS final acreage estimates.
The second issue is related to how much corn was used in the months of September, October, and November. Those are the first three months of the marketing year. USDA totals 4.25 billion bushels of disappearance of which feed and residual use accounted for 2.198 billion. This number is a 114 million bushels lower than the usage in the same period last year after it was revised down. The problem says the U of I number cruncher is that over time the range of usage represented in the first quarter figure as compared to total usage for the year has gotten wider.
First quarter use is no longer a reliable forecaster of total marketing year consumption. It means a lot of uncertainty will persist in the marketplace about how much corn is being fed to livestock.
The numbers do get better as time passes during the marketing year. The expectation is the March 31 Grain Stocks report will be more accurate.

The third issue with the January USDA figures is also in the consumption numbers. The implied residual disappearance of soybeans in the first quarter set a record. This might mean the size of the 2014 soybean crop was over estimated.
While this is an issue it will not be resolved for several months with some insight coming from the March Grain Stocks report.
Time will eventually fix all three issues, but it is important to recognize them and the potential changes these may bring to the commodity markets.