Corn stocks are substantially higher than a year ago and higher than expected, while soybean stocks—also substantially higher than expected—are now likely large enough to fill needs until new-crop harvest.
"We are looking at a lot of carryover in the corn market, which is not much of a surprise," says Jonah Ford, senior analyst with Ceres Hedge in Schererville, Ind. Ford was the commentator on the MGEX post-report press call.
Coupled with a forecast for a good growing season, large stocks are bearish for the corn market.
"This will keep pressure on any rallies as producers throw in the towel," says Ford.
Nearly 40% More Corn
Corn stocks in all positions as of June 1 totaled 3.85 billion bushels, up 39% from the previous year. Going into the report, the average trade estimate for corn stocks was 3.722 billion bushels, with a range of 3.046 billion to 3.95 billion bushels.
Of total stocks, 1.86 billion bushels were stored on farms, which is 48% more than at this time last year. Off-farm stocks of 1.99 billion bushels, were up 32% from a year ago.
The March through May indicated disappearance for corn was 3.15 billion bushels, compared with 2.63 billion bushels during the same period a year ago, but feed use is slowing.
"We have some concerns regarding feed use," says Rich Nelson, chief strategist with Allendale, a brokerage firm in McHenry, Ill. "If we are right on ethanol usage and export numbers, feed use would have had to fall 4% this quarter from last year’s levels."
Lower feed use than a year ago, would be an abrupt change. For the last two quarters combined, feed use was 22% higher than the prior year.
Red Flags Flying
"A slowing rate of feed use versus the previous year—despite sharply lower corn prices—raises some red flags," says Nelson. And the likely culprit in slowing feed use is the porcine epidemic diarrhea (PED) virus, which could be taking more hogs off the market than earlier anticipated, he adds.
Soybeans stored in all positions as of June 1 totaled 405 million bushels, down 7% from last year but well above the average trade guess of 379 million bushels. Quarterly soybean stocks were inside the range of estimates of 334 million to 440 million bushels. On-farm stocks totaled 109 million bushels, down 36% from a year ago. Off-farm stocks, at 296 million bushels, were 12% larger than last year. Indicated disappearance for the March through May quarter for soybeans totaled 589 million bushels, up 4% from the same period a year earlier.
So far this year, rains overall have been beneficial, so without a widespread weather issue, soybean prices are likely to remain under pressure through harvest.
Ford would not be surprised to see November soybeans drop to $10.50 or $11/bu.
New-Crop Stocks to Mount
Nelson expects ending stocks of soybeans to drop to 119 million bushels in July’s World Agricultural Supply and Demand Estimates (WASDE), but says that number will likely be revised higher by the end of the year to somewhere between 120 million to 135 million bushels.
New-crop ending stocks of soybeans, according to Nelson, could hit 393 million bushels, while new-crop corn carryout could be close to 1.72 billion bushels.