Market Perspectives May 09, 2014

Chicago Board of Trade Market News

Outlook: USDA released their initial estimates for U.S. feed grain production in the 2014/15 season and the data was somewhat bearish in comparison to market expectations. U.S. corn production in the 2014/15 season is projected to be 13.9 billion bushels as higher expected yields more than offset by the year-to-year reduction in planted area. This corn production estimate is above the average analyst’s estimate of 13.735 billion bushels. One reason for USDA’s larger than expected estimate is that the average U.S. corn yield is estimated to be 165.3 bushels per acre. This is a 6.5 bushel per acre increase above last year’s average yield of 158.8 bushels per acre. USDA seems to have little concern about the present planting pace of U.S. corn.

U.S. feed use was reduced by 50 million bushels in the 2014/15 season, from 5.3 to 5.25 billion bushels, because of reduced animal inventory on feed. U.S. corn exports were also reduced by 200 million bushels next season, down from 1.9 to 1.7 billion bushels, due to larger available foreign supplies. However, adjustments did occur among global producers: decreases in corn production are expected to occur in Ukraine, Brazil, India and South Africa. Those combined reductions are expected to be offset by increased production in China, Argentina, Russia and Mexico. The increased corn production in China and Mexico is expected to result in less global export trade. Even though global year-over-year corn production is basically unchanged, the global ending stocks of corn in the 2014/15 season are projected to increase to a 15-year high of 181.7 MMT. This is an annual increase of about 13.3 MMT, which is about an 8 percent increase in global corn stocks.

USDA projects that the average farm price of U.S. corn in the 2014/15 season will range between $3.85 to $4.55 per bushel as final ending stocks are a rather comfortable 1.726 billion bushels. The increase in the average U.S. sorghum yield to 64.3 bushels per acre will not fully offset a decline in acreage. However, reductions in total usage will allow ending stocks for U.S. sorghum to increase from 19 million bushels in the 2013/14 season to 24 in the new 2014/15 season. Oat ending stocks in the 2014/15 season will also increase from 25 million bushels in 2013/14 to 37 million bushels in 2014/15. Barley ending stocks are projected to remain basically unchanged from 85 million bushels in 2013/14 to 82 million bushels in 2014/15. In harmony with the lower corn prices, USDA projects that the average farm price for sorghum, oats and barley will all decline in the 2014/15 season.