WASDE results show more US corn than expected

By Aerin Einstein-Curtis contact

- Last updated on GMT

© iStock
© iStock
Corn production sees a bump, while domestic soybean production gets trimmed, however markets for both are “bearish,” says economist.

Details of the production and trade of several feed crops were released Thursday (November 9) in the US Department of Agriculture’s (USDA) World Agriculture Supply and Demand Estimates report​.

The biggest surprise was a change in the overall production of corn in the US, said Chad Hart associate professor of economics, crop markets specialist and extension economist at Iowa State University.

“When you see a 3.5 bushel [per acre] jump in November that’s a huge jump from a USDA historical perspective,” ​he told FeedNavigator. “The trade had settled in close to where USDA was and now it’s sort of a gut punch to the market.”

However, there were some offsetting factors to the production increase that help “soften the blow,”​ he said. These include expectations for increased exports and demand for feed and residual use.

The report was bearish for both corn and soybeans, he said. However, the market reaction to the increased corn crop was not extreme, as prices have been dropping in the last few months.

In terms of soybean production in the US and globally, Hart said:.

“[It was] just another great year out there – and this is about the fourth year in a row to say that,” ​he said. “When you do, you tend to see the prices that we’re seeing – lower prices throughout the entire year.”

Corn’s surprise

Overall, the US outlook for corn production in 2017/18 has been increased with growth also reported for feed and residual use and exports, said the USDA. However, ending stocks also are expected to increase.

Corn production is predicted to be about 14.578bn bushels – a hike of 298m bushels from last month’s expectations, said the department. Feed and residual use and exports were both raised by 75m bushels.

The US is expected to be more competitive globally, with reduced exports from the Ukraine and a drop in sorghum production in Mexico, said the department. However, supply is anticipated to increase more quickly than demand leaving ending stocks up 147m bushels from last month and a season average corn price unchanged with a midpoint of $3.20 a bushel.

It is early in the discussions of planting for next year, said Hart. However, there may be some interest in shifting acres to other crops.

“Soybeans are sort of winning the [price] battle if you look at this crop, but corn looks attractive if I look at next year’s crop – it’s sort of a split,” ​he said. “Corn does not look attractive nearby [pricewise], but the 2018 prices, if you look far enough out, you see $4s on the board, and that is offering some hope.”

Additionally, there is a good long-term story for corn use as demand remains high and could increase on the feed side and is staying consistent for the biofuel industry, he said. “The problem has been, even with strong demand, production has been just a little bit stronger,”​ he added.

Global production of coarse grains also has been increased, said the USDA. But foreign corn production is expected to drop with smaller crops coming from Ukraine, Russia and Vietnam although global corn stocks rose from last month.

The corn export market is anticipated to improve for the US, but fall for Ukraine, the department said. Imports have been increased for Mexico and Canada but dropped for South Korea.

Soy market and production

US soybean production is forecast to be about 4.4bn bushels, a drop of 5m from last month from a slight reduction in yield, said the USDA.

The season average price for soybeans is up fractionally, as a result, at $0.10 at the midpoint to $9.30 per bushel and the soybean meal price range has been raised to $295 to $335 a short ton.

Globally, soybean production, demand and stocks have been increased from last month, said the USDA. Soybean production in Brazil grew 1m tons to a predicted amount of 108m tons based on increased area planted.

Higher exports are expected from Brazil and Paraguay, the department said. Soybean imports to China have been increased.

Ending stocks for foreign soybeans in 2017/18 also were raised based on increases in China, Argentina and Brazil.

Wheat production and forward look

Ending stocks for the 2017/18 wheat crop were reduced by 25m bushels based on increased exports, said the USDA. Ending stocks are expected to remain above the 5-year-average, though down about 246m bushels from the previous year.

The season-average farm price continues to have a midpoint of $4.60, said the department.

Globally, wheat supplies dropped slightly based on lower beginning stocks, said the department. However, global production has been increased based on additional crop in Russia and the EU.

Exports are forecast to increase from the US, Russia and to fall for Australia, said the department  

However, planting of high-quality spring wheat may be an area that sees more acres if strong production and low prices continue, said Hart. “If there’s one area that could be a little short it would be food quality wheat,”​ he added.

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