Market Analysis

The market’s focus is currently on this spring’s US planting season, which has gotten off to a sluggish start because of recent rains across the central US and some bouts of cold temperatures leaving soil conditions less than ideal. This situation remains important, but previously indicated reduced planting intentions may have already turned the USDA’s initial 2017/18 US and World corn supplies lower in their first forecasts being released on May 10. With the Ag Department utilizing last month’s planting levels and it’s Ag Outlook Forum yield ideas for US crops and overseas reports about area and yield trends from their attaches and the media, corn’s output may drop over 1 billion bu. in the US and 7 mmt in China. Overall, this lower output of nearly 35 mmt will be tough to overcome given the record corn output 3 out of past 4 years. Given the 18% jump in world corn demand (156 mmts) since 2012/13, a 2% rise in corn‘s world demand for the upcoming year (20 mmt) could even be conservative if prices remain at historic lows.

Ongoing strength in US export corn shipments also suggests the USDA should up this demand level given the current export level is over 110 million bu. ahead of the 5 year average pace for this date in the crop year, After last month’s changes in feed and ethanol demand, a 50 million increase in overseas demand seem appropriate. Given this spring’s US decline in alternative feed grain seedings in sorghum, barley and oats, a modest increase in corn’s domestic demand (130 million bu.) seems appropriate vs. the USDA’s February projection. A similar situation is likely in corn’s 2017/18 export arena with expanding world industrial and feed demand likely keeping the coming year’s overseas shipments near this year. Overall, corn ’s US ending stocks will likely shrink below 2 billion bu. but a 3-5 bu decline below the past 3 year average yield will be needed to ration supplies. 

What’s Ahead

Along with this spring’s planting pace, this year’s previously announced lower US and Chinese corn seedings will likely reduce the USDA’s 2017/18 US and World stock levels from current levels when using the trend line yields. These reduced supplies should add some support to this feed grains’ price.