Economic Research Service Economists Mark Ash, in his presentation of the grains and oilseeds outlook for 2014 at USDA’s Ag Outlook largely reiterated Chief Economist Joe Glauber’s assertions Thursday, with the addition of a few more details: USDA expects grain and oilseed production to rise, with the result being lower prices.
He wrapped up his presentation with the following "key points:"
- U.S. acreage to remain high
- Corn and soybean yields to improve (better weather)
- Modest gains in domestic use (steady, but unspectacular)
- Export competition stays high
- Prices will weaken (provided there are no major crop failures in the world)
Following are some additional details regarding individual crops.
The figures: Corn crop is put at 13.985 billion bu. on 165.3-bu.-per-acre yield on 84.6 million harvested acres. Feed residual use at 5.4 billion bu. combined with total Feed, Seed and Industrial (FSI) use of 6.43 billion bu. (5.0 billion for ethanol) and exports of 1.550 billion for 2.111-billion-bu. carryover. Season-average price: $3.90 per bushel.
Explanation: Corn plantings are expected to fall due to diminished price and return outlooks for the crop. But higher yields due to a return to "normal" weather are expected to increase corn production over last year’s record-high levels. The fact that supplies were rebuilt in 2013-14 means carry-in stocks are expected to be up sharply in 2014-15.
Ash spent some time talking about how corn use for ethanol production in 2014-15 is expected to hold steady at 5 billion bu. as lower gasoline consumption limits blending opportunities domestically, which is expected to be offset by improved export prospects.
Ash also noted that export competition has increased and is expected to continue to do so amid marked increases in output by Brazil and Ukraine. Argentina may also return as a major competitor, barring any government actions or currency complications. While China is expected to remain a major importer of U.S. corn, the rate of imports is expected to decline in 2014-15 relative to the year prior.
The figures: Soybean crop of 3.550 billion bu. on 45.2 bu. per acre yield on 78.5 million harvested acres. Total domestic use of 1.83 billion bu. (crush of 1.725 billion) and exports of 1.6 billion bu. push carryover up to 285 million bushels. Season average price: $9.65 per bu.
Explanation: Soybean plantings are expected to increase in 2014-15. The increase is seen as driven by more favorable soybean pricing opportunities relative to corn and a move to fewer corn-on-corn acres. On the other hand, acreage gains are expected to be moderated by an expected increase in cotton plantings in the Delta and the decline in double-crop soybean production.
While soybean production is expected to rise 8% to 3.55 billion bu., the gain in exports is expected to be more moderate. Large global stocks will represent a "formidable" barrier for U.S. export expansion. China will remain the main driver of foreign demand as the nation accounts for more than half of global soybean imports.
Export demand for U.S. soymeal is also expected to grow modestly amid improved demand from the EU and Southeast Asia countries, as well as lower U.S. prices. Increased export competition will temper gains, according to Ash.
Soyoil export sales are expected to rise notably (10%) amid higher supplies and lower domestic use.
The figures: Wheat crop of 2.160 billion bu. on 45.8 bu. per acre yield on 47.2 million harvested acres. Total domestic use of 1.231 billion bu. (including 190 million bu. feed/residual) and exports of 1.050 billion bu. put carryover at 587 million bushels. Season average price: $5.30 per bushel.
Explanation: For wheat, Ash noted that harvested acreage is also expected to rise due to a lower level of abandonment in the U.S. this year. While drought still covers much of the Great Plains, conditions have improved notably from last year. Nevertheless, lower carry-in supplies and a modest reduction in use—livestock producers are expected to favor corn over wheat and exports are expected to decline due to ample global supplies—are expected to result in lower wheat supplies in 2013-14.
Wheat production in most major exporting countries is expected to hold near steady with 2013-14 levels, and Canada’s logistic problems are expected to ease by 2014-15.
Expansion of Beef Cattle Herds Possibly on the Horizon
Closing Market Commentary -- February 21, 2014