Chicago Board of Trade Market News
Outlook: A subtle but important factor contained with USDA’s July WASDE report is the reduction of the ending stocks estimate below 1.8 billion bushels for the current 2014/15 marketing year that will soon end on August 31, 2015. The importance of this fact is that it raises the price floor for the nearby corn contracts and it reduces the beginning stocks estimate for next season.
Increased demand is what reduced the estimate for 2014/15 corn ending stocks from the June estimate of 1.876 billion bushels to the new estimate of 1.779 billion bushels. This adjustment is important first because it dampens any justification for shoving the nearby futures contracts back below $4.00 per bushel. Second, the reduced ending stocks for the current season become the beginning stocks for the approaching 2015/16 season that will begin on September 1. Naturally, the lower beginning stocks flows right through next season’s balance sheet to result in ending stocks for the 2015/16 season dropping from the July estimate of 1.771 to 1.599 billion bushels.
Please consider that the prospect of 2015/16 U.S. corn ending stocks being at least 1.6 billion bushels is dependent upon the average corn yield falling no further than the current estimate of 166.8 bushels per acre. The reason that USDA chose not to adjust their yield estimate in the July WASDE is because the normal protocol is to wait upon actual field surveys and make adjustment to yields in the August data. Holding all other factors constant, each one-bushel drop below the current corn yield estimate of 166.8 bushels will reduce the ending stocks of U.S. corn by more than 81 million bushels. In other words, a reduction of less than 2 bushels per acre from the current estimate will cause U.S. corn ending stocks to fall below 1.5 billion bushels.