China could be the best hope for an increase in corn prices this year.
Analysts will be watching U.S. corn exports when USDA releases its June 12 World Agricultural Supply and Demand Estimates (WASDE). China has already been purchasing U.S. new-crop corn at a record pace for this time of year, which could provide the best hope in this report for increasing prices.
Looking at old-crop corn first, an increase in projected demand from the ethanol industry could offset demand losses elsewhere to leave the U.S. carryout of old-crop corn unchanged at 759 million bushels, according to average trade estimates. How USDA adjusts the new-crop corn numbers, however, will be far more important.
"The question is whether production declines—whether in Wednesday’s report or in subsequent reports—will be large enough to impact a very bearish new-crop scenario," says Rich Nelson, chief strategist for Allendale, Inc., in McHenry, Ill.
Nelson and others do not expect USDA to factor in any major yield and acreage reductions for new-crop corn or soybeans in this report. Acreage reductions are more likely to occur when USDA releases its Acreage report June 28, and USDA probably won’t factor in "real world" yield reductions until its July 11 supply and demand report, Nelson says.
"USDA will not be showing us a full picture of production in Wednesday’s report," Nelson adds.
Agricultural economist Chad Hart of Iowa State University expects the June WASDE report to be similar to USDA’s May estimates. "More than likely we’ll see a high production estimate near 14 billion bushels, and demand could be pushed to close to 13 billion bushels," Hart says. "That means stocks will continue building, and supplies will continue to outstrip demand."
While analysts expect the new-crop corn carryout to be substantially lower than USDA’s May estimate of 2.044 billion bushels at a projected 1.795 billion bushels, it will still be substantially larger than both last year’s 989-million-bushel carryout and this year’s projected 759 million bushels.
World Corn Crop to be Trimmed
Turning to South America, projected corn production is expected to be substantially smaller in both Brazil and Argentina. The average trade estimate for corn production in Argentina of 25.9 million metric tons, if realized, would be 2.3 percent smaller than USDA’s May estimate of 26.5 million metric tons. Likewise, analysts expect USDA to trim Brazil’s corn production by 900,000 metric tons to 75.1 million from USDA’s May projection of 76 million metric tons.
World corn production could also drop due to reduced expectations in the United States. According to Chicago-based crop forecaster Lanworth, world corn production could drop by 4 million metric tons to 961 million metric tons. Lanworth cut its outlook for U.S. corn production 1 percent to 13.8 billion bushels due to an expected 800,000-acre reduction in corn plantings in Iowa, Missouri, and Wisconsin.
New-Crop Soybean Stocks to Build
Analysts expect USDA to drop carryout for old-crop soybeans to 121 million bushels, a 3.2 percent drop from last month’s 125 million bushels and a more than 28-percent decrease from last year’s 169 million bushels. The average trade estimate for the new-crop carryout of soybeans is expected to increase somewhat from USDA’s May estimate of 265 million bushels to 268 million.
Allendale’s estimate for the new-crop soybean carryout of 296 million bushels factors in an increase in U.S. soybean acreage of 1.75 million acres and a 43.35-bushel trend yield. While higher than the average trade estimate, Allendale’s projected carryout falls well within the range of estimates of 185 million to 344 million bushels.
Brazil’s Ministry of Agriculture recently trimmed projected soybean production to 81.3 million metric tons. Brazil’s official estimate compares to recent projections from Swiss-based Informa of 82 million metric tons, 82.5 million from Allendale, and USDA’s May estimate of 83.5 million metric tons. Last year, Brazil produced 66.5 million metric tons of soybeans.
"Certainly, China’s soybean import numbers will be important," Nelson says. "But the trade probably won’t get too excited about Brazil’s and Argentina’s production numbers."
Informa anticipates world soybean production to reach 286.6 million metric tons for the 2013-14 crop year, slightly higher than USDA’s May forecast of a record 285.5 million tons.