A tightening of last year’s corn balance sheet from upward demand revisions in USDA’s September WASDE report could indicate a stronger demand for corn in the year ahead, says Jerry Gidel, feed grain analyst at Rice Dairy, LLC.
In the data released last week, corn carryout for the 2014-2015 marketing year that ended Aug. 31, was revised downward by 40 million bushels to 1.732 billion bushels. That shrinkage of last year’s balance sheet contributed to the shorter ending stocks estimate for the current marketing year, which USDA dropped by 121 million bushels to 1.592 billion. Most of the revision on this year’s ending stocks figure came from a lower estimate on total crop production from lower crop yields.
Looking closer at last marketing year’s revision reveals USDA’s thinking about corn demand, Gidel says, with their adjustments causing a tightening of supplies in this marketing year’s budget.
USDA raised corn export demand for 2014-2015 by 25 million bushels to 1.875 billion bushels, and food, seed and industrial usage was lifted 15 million bushels to 6.570 billion with food and seed demand raised by 10 million and ethanol increased by 5 million.
The increase in last year’s demand profile can be attributed to multiple factors that helped shrink the supply picture for both 2014-2015 and 2015-2016, Gidel says.
A possible reason for the 25-million-bushel increase in export demand is from increased exports of newly harvested corn in the southern U.S. that overlapped with the previous crop year.
“In the past two or three years, we’ve had this big rush of corn of new crop in the south went someplace else because of disease issues or vomitoxin,” he says, but adding that strong feed demand has kept more corn in the U.S. lately.
Recent exports of U.S. corn to Mexico in particular have been respectable, Gidel points out. In August, U.S. shipments of yellow corn to Mexico were tallied at 952,822 metric tons, according to USDA, which compares to July shipments of 844,974 metric tons.
Ethanol usage also grew through the end of the 2014-2015 marketing year. EIA reported ethanol production for the month of August at 3.830 million barrels, versus production in August 2014 of 3.683 million barrels.
The upward revisions on last year’s demand figures could be pointing to a stronger demand picture in the year forthcoming. Low corn prices, Gidel says, are building demand, particularly for feed usage.
In the September report, USDA moved their feed and residual estimate for 2015-2016 down slightly from their August figure to 5.275 billion bushels, which is 25 million bushels under last year’s estimate.
But assuming corn prices remain favorable for end users, Gidel sees demand particularly in the livestock sector growing in the year ahead with USDA adjusting corn’s balance sheet accordingly.
“I think in the coming year, unless we can get a corn price above five bucks, we’re not going to run anyone away in this livestock business,” he says. “I sure don’t see a big decline on feed usage.”