High Supplies: Outlook Predicts Bins Will Bulge in 2016

March 30, 2016 02:01 AM

USDA outlook predicts bins will bulge in 2016/17

Bumper crops in the U.S. and South America are having a lingering downside for commodities, as shown by USDA’s outlooks released in late February at the 2016 Agricultural Outlook Forum in Washington, D.C.

“I would describe the 2016/17 forecasts as bearish,” says Brian Basting of Advance Trading. Corn carryout is predicted to be near 2 billion bushels and soybeans will remain relatively unchanged at a burdensome 440 million bushels, while the wheat crop will approach 1 billion bushels.

Are those reasonable estimates by USDA? Analysts seem to think so. “Usage projections seem realistic given what we know today,” Basting says. “The U.S. production estimates all seem achievable.”

That environment will require farmers to pay close attention to their marketing opportunities and their costs of production, particularly when moving old-crop grain. 

Such high levels of stocks could have consequences beyond prices. 

“It looks pretty hopeless on paper without weather problems,” says Andy Shissler of S&W Trading. “It is going to create the shakeup in rent that eventually breaks the land market. Everything else has died. Land is next.”

Corn Stocks Balloon. USDA projects corn ending stocks of 1.98 billion bushels in the 2016/17 marketing year, which would represent a 12-year high. Such stocks are expected to push corn prices down to a season-average farm price totaling $3.45 per bushel.

Yet not all analysts are convinced farmers will plant as much corn as USDA thinks. The forecast of corn acreage is “certainly achievable, though heavy rains are hampering field work in the southern U.S.,” Basting points out. “Spring weather will be the final determinant across the Midwest.”

One bright spot is increased feed demand from the pork, poultry and cattle sectors.

Soybeans Bulk Up. U.S. soybean ending stocks remain high, totaling 440 million bushels, and another large crop—the third-biggest in history, if forecasts are correct—is expected this year. Still, soybean exports are expected to increase to hit 1.83 billion bushels in 2016/17.  

“Lower soybean prices will continue to spur growth in global demand, with U.S. exports sharing gains in trade with South American producers,” USDA’s forecast states. 

What will farmers get for their crop this year? Not as much as they’d like. USDA predicts a season-average farm price of $8.50 per bushel.  

USDA Announces 2016/17 Crop Expectations
Commodity prices likely will remain under pressure because of massive stocks, USDA predicts. These late February numbers are expected to be adjusted based on results of the agency’s Prospective Plantings report due out March 31. 


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