|
 “The average cash price in central Illinois was 14 cents under
July 2015 futures on April 23, compared to 70 cents under in
late September and early October 2014,” said Darrel Good. “Low
corn prices appear to reflect expectations for a combination of
prolonged demand weakness and another year of ample supplies.”
Good explained that expectations for demand weakness center on
the ethanol and export markets. “It is generally argued that
plateauing domestic ethanol consumption, a stronger dollar that
could favor ethanol imports and discourages exports, and low
crude oil prices will limit the price of ethanol and the demand
for corn,” he said. “Similarly, abundant world grain supplies
and a stronger dollar are expected to create a weak demand
environment for U.S. corn in the world market. In contrast,
domestic feed demand for corn should be supported by ongoing
expansion in livestock and poultry numbers, even with some loss
of poultry numbers to bird flu.”
The supply of corn for the 2015-16 marketing year will consist
of carryover supplies of old-crop corn and the 2015 harvest. The
USDA currently projects the carryover of old-crop corn at 1.827
billion bushels.
“The most uncertainty about consumption of corn during the
remainder of the 2014-15 marketing year is in the feed and
residual category,” Good said. “The combination of expanding
livestock numbers and low corn prices should generate a high
level of consumption. Currently, the USDA projects use during
the last half of the marketing year at 1.569 billion bushels,
which would account for 30 percent of the marketing-year total.”
Last year at the same time, the USDA projected that use during
the last half of the year would total 1.535 billion bushels and
account for 29 percent of the marketing-year total, Good said.
Use actually totaled only 1.27 billion bushels, accounting for
25 percent of the marketing-year total. Because there is a
fairly large residual component of feed and residual use, total
marketing-year use will not be known until the September 1 Grain
Stocks report is released. As was the case last year, that
report can contain a surprising estimate of old-crop corn
stocks.
Good said the potential size of the 2015 harvest will unfold
over the next several months. The USDA’s March 31 Prospective
Plantings report revealed that 89.199 million acres of corn were
intended to be planted this year, 1.398 million fewer acres than
planted last year. An estimate of actual planted acres will be
available with USDA’s June 30 Acreage report.
From 1996 (the beginning of the freedom to
farm era) through 2014, the final estimate of planted acreage of
corn exceeded the March intentions estimate in seven years and
was less than the March estimate in 12 years. In most years, the
difference was within the range of sampling error, estimated at
1 to 3 percent. The exception was 2007 when actual planted acres
exceeded intentions by nearly 3.1 million acres. In the
remaining 18 years, the difference ranged from 32 thousand to
1.925 million acres and averaged 920 thousand acres (in absolute
terms).
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“It is interesting that in eight of the 19 years the June acreage
estimate failed to correctly identify the direction of the
difference between intended and actual acreage,” Good said.
“There is already a lot of discussion again this year about the
direction and magnitude of the difference between actual and
intended acreage of corn. Chances are the difference will not
substantially alter production expectations.
“The near-term focus will be on yield prospects for the 2015
corn crop,” Good said. “For now, commentary will focus on the
rate of planting progress and yield potential. All else equal,
the larger percentage of the crop that is planted in a timely
fashion, the higher the U.S. average yield potential. However,
all else is rarely equal, with the magnitude of yield ultimately
determined by summer weather. The generally late planted crop of
2009, for example, experienced a new record yield while the
extremely early planted crop of 2012 experienced the lowest
yield in 17 years.”
According to Good, unless an unusually large or small percentage
of the crop is planted late this year, yield expectations should
continue to focus on trend value in the range of 164 to 165
bushels. The USDA will report an expected yield in the May 12
World Agricultural Supply and Demand Estimates (WASDE). That
yield expectation is based on a weather-adjusted trend model
that reflects expected planting progress at mid-May.
“Uncertainty about the size of the 2015 corn crop will continue
for the next few months,” Good said. “Similarly, the strength of
corn demand will be revealed over time. In addition to the
weekly pace of exports and ethanol production, the USDA’s
estimate of June 1 stocks that reveals third-quarter feed and
residual use will be important indicators of demand strength.
The expected June announcement by EPA in regard to biofuels
mandates will also be potentially important for corn demand.
Current prices appear to reflect minimum production risk and
surprisingly weak demand prospects,” he said.
[Debra Levey Larson, University of
Illinois College of ACES] |
