The supply and demand picture both for old and new-crop corn as well as for new-crop soybeans continues to worsen for crop producers, according to USDA’s World Agricultural Supply and Demand Estimates (WASDE), released April 10.
"We are not selling corn, we are not feeding it, and we are not making it into ethanol. Corn prices are going to head down," says Peter Georgantones, account executive with Roy E. Abbott Futures, Minneapolis. Georgantones was the commentator on an MGEX press call following the report.
Corn Could Head to $4.00
Georgantones expects new-crop corn prices to sink to near $4.00 per bushel, barring any major weather issues, and says that $7.50 corn choked plenty of demand.
USDA decreased its feed use and residual estimate by 150 million bushels, upped demand for corn from the ethanol sector by 50 million bushels, and lowered exports by 25 million bushels to come up with its higher estimated carryout.
USDA raised its monthly 2012-13 corn carryout by 125 million bushels to 757 million bushels, which was still substantially lower than the average estimate of 812 million bushels, but well within the range of 625 to 925 million bushels.
Following the report, corn prices initially rallied about 20 cents before falling close to the flat line.
The department’s projected soybean carryout of 125 million bushels was also lower than the average trade estimate of 136 million bushels and within the range of 107 million to 160 million bushels. That puts the stocks-to-use ratio at a tight 4.1 for old-crop soybeans.
Larger world supplies of soybeans and a good U.S. crop could push new-crop soybean prices to $10/bu., Georgantones says.
"For corn prices to work their way higher, it would take true sings that demand has started to pick up," says Chad Hart agricultural economist with Iowa State University. "We could see it in exports or ethanol." A return to a dry pattern in the western Corn Belt could also lift prices, he says.
Wheat Feeding Falls Out of Favor
The wheat carryout of 731 million bushels was slightly higher than the average trade estimate of 727 million bushels and within the range of estimates of 700 million to 755 million bushels. The big shift in wheat stocks came mostly from hard red winter stocks, which were raised 25 million bushels.
Wheat is currently priced at about a 50 to 60-cent premium to corn, and with continued poor weather conditions in the northern plains, Georgantones expects some intended corn acres to shift back into wheat. Six weeks ago, wheat was only 10 cents more than corn, then corn prices fell, making corn more competitive again in feed rations.
"I think we are seeing feed demand move much more nimbly now than we used to," says Hart. Since USDA’s quarterly Grain Stocks report released in late March, nearby corn futures have dropped about $1/bu.
"Wheat could erode down to $6.00 to $6.25 as winter wheat harvest approaches," says Georgantones.
Even Bigger Crops in South America
Looking globally, USDA estimates corn production in Argentina at 26.5 million metric tons, unchanged from its March estimate but substantially higher than last year’s output of 21 million metric tons. USDA raised its projection for Brazil corn production to 74 million metric tons, well over the average trade estimate of 72.9 million metric tons and slightly higher than last year’s output of 73 million metric tons.
USDA left projected soybean output in Argentina unchanged at 51.5 million metric tons, compared to the March estimate. The department also left projected soybean production in Brazil unchanged at 83.5 million metric tons.
The average trade estimate for corn production in Argentina was 50.5 million metric tons, with the average estimate for Brazil’s soybean output at 82.5 million metric tons. Together, the two countries are expected to produce 135 million metric tons, up 12.7% from last year’s 106.6 million metric tons.
Global 2012-13 carryout stocks of corn are expected to be 125.3 million metric tons, still substantially smaller than last year’s 131 million but much higher than the average trade estimate of 119.1 million tons and larger than last month’s estimate of 117.5 million metric tons.
"World corn stocks are going in the wrong direction if you are a bull," says Georgantones.
USDA raised world soybeans stocks to 62.6 million metric tons from its previous estimate of 60.21 million. The average trade estimate called for world carryout of 59.8 million metric tons. While projected world stocks of old-crop beans are substantially larger than last year’s 55.25 million metric tons, they are still very tight.
Coverage, Analysis of the April 10 USDA Reports
See all of the data, coverage and analysis of the WASDE and Crop Production reports.