Chicago Board of Trade Market News
Outlook: The composite of USDA data that was published on Monday January 12 was neutral for feed grains. There was a 2.4 bushel per acre reduction in the average U.S. corn yield to 171 bushels, but the yield and production are still record large and global supplies are abundant. Domestic feed consumption was reduced by 100 million bushels because usage in the first quarter of the crop year (September-November) was less than expected. The reduced feed usage was partly offset by a 25 million bushel increase in corn for ethanol production, but that increase may be somewhat premature due to recent steep declines in ethanol producer margins. Alternatively, the export estimate for the 2014/15 season was left unchanged at 1.75 billion bushels and that could increase if there is any further decline in U.S. corn prices.
Sorghum exports have been particularly strong and are up 17 percent annually. Exports are expected to consume about 58 percent of total sorghum supplies during the 2014/15 season. Chinese buyers appreciate U.S. sorghum because their government places no import quota on it (unlike corn) and there is virtually no likelihood of rejection by customs authorities. This aggressive buying has created the rare occurrence when the average U.S. farm price of sorghum is above the price of corn.
The estimated farm price of U.S. sorghum at $3.80 per bushel is 15 cents above the average farm price of corn at $3.65 per bushel in 2014/15. USDA notes that the last time this happened was in the 2006/07 crop year. Prior to that year, there were only 10 other years when U.S. sorghum prices averaged above corn and most of those events were in the 1920’s and 1930’s.
In relation to barley, total barley supplies of the present 2014/15 season are estimated to be down about 7 percent. USDA data also indicated that total U.S. barley stocks on December 1 were down 7 percent from a year ago at 157.7 million bushels. A noteworthy comment by USDA is that Minneapolis feed barley prices have been steadily increasing since establishing a low in the first week of September.
Corn remains the dominant influence on price because it is expected to account for 93 percent of feed consumption in the 2014/15 seasonal. From present levels, substantial declines in the price of corn contracts seems unlikely because the yield reduction to 171 bushels per acre and ending stocks of 1.877 billion bushels means that any setback in the nearby corn futures contract below $3.70 is likely to be perceived as a buying opportunity by global end-users. Unfortunately, local basis in certain regions could be weak because of poor ethanol producer margins.