Chicago Board of Trade Market News
USDA updated the world supply and demand estimates today with the release of the July WASDE report. The balance sheet with U.S. corn estimates was adjusted for the current 2013/14 season that will end on August 31, with feed use of corn being reduced by 125 million bushels. That reduction in feed use was partly offset by a 25 million bushel increase in corn used for ethanol production. The end result for the current season was a 100 million bushel increase in corn ending stocks, from 1,146 to 1,246 million bushels – which in turn resulted in USDA reducing the range of estimated farm prices for corn by 10 cents. USDA’s limited price adjustment makes sense because the corn stock-to-use ratio for the current season remains below 10 percent. However, a more aggressive decline continues in both old-crop and new-crop corn futures contracts as long speculators attempt to exit and buyers remain hesitant to make purchases until a bottom in price charts is better defined.
A reduction in harvested acreage caused the production estimate for U.S. corn production in the 2014/15 year to decline by 75 million bushels. However, that decline in production was more than offset by the 100 million bushel increase in beginning stocks that was carried over from the current season, and a 50 million bushel reduction in the estimate for feed use in the approaching new crop season. As a result, the estimate for corn ending stocks increased by 75 million bushels in the 2014/15 season, from 1.726 to 1.801 billion bushels. While this ending stocks estimate is really not excessively burdensome, the common consensus in the market is still a bearish mindset, and will likely remain so until large speculators are thoroughly washed out of their losing long positions. Ironically, that point is also likely to be when many buyers will uniformly decide that it is the time right to step in and cover their needs for the season.
Looking beyond this fall’s feed grain harvest for 2014/15, market-related discussion may transition from the topic of large production to the topic of even larger demand, similar to what occurred after the bumper crop year of 1994.