USDA Projects Big Increase In Corn Ending Stocks

12:54PM Feb 21, 2014
Corn Pile
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The annual grain outlook calls for bigger crops and lower farm prices.

Corn futures tumbled Friday morning after USDA issued an outlook for grains and oilseed in 2014 that called for a 43% rise in corn ending stocks—from 1.4 billion bushels in 2013 to 2.1 billion in 2014.

The forecast, released Friday morning at USDA’s Outlook Forum, calls for corn farm prices to drop from an average of $4.50 in 2013 to $3.90 in 2014.

USDA is also calling for a sharp reduction in soybean prices, to an average of $9.65 in 2014 from $12.70 in 2013, as ending stocks rise from 150 million bushels to 285 million bushels, the highest level in eight years. Prices for soybean futures, by contrast, rose after release of the report.

The government forecasts that planted acres of corn, soybeans and wheat will be down somewhat this year, by roughly 1 million acres. But it is calling for higher yields for corn and soybeans based on a return to normal weather conditions, said Mark Ash, an economist with the Economic Research Service of USDA, speaking at the event.

Reduced plantings of wheat and corn, Ash said, will be partly offset by an increase in soybean acres planted. "Despite a decline in fertilizers costs," Ash said, "corn should lose acres to soybeans." USDA predicts that 700,000 fewer wheat acres, 3.4 million fewer corn acres and 3 million more soybean acres will be planted.

USDA is projecting an average corn yield of 165.3 bu. per acre, compared to 158.8 bu. per acre last year. It shows soybean yields increasing from 43.3 bu. per acre to 45.2 bu. per acre. Wheat yields, on the other hand, are expected to decline, based on early reports for winter wheat.

A big corn crop—USDA pegs it at 13.98 billion bushels—will push farm prices for corn below $4, Ash said. The department isn’t forecasting much change in domestic use of corn for feed (5.4 billion bushels) or ethanol (5.0 billion bushels.)

Gas consumption, which peaked in 2006, will continue to decline this year, due in part to an aging population that drives less. And the blending of ethanol has neared its maximum potential, Ash said. "The blend wall came sooner than anticipated," he said.

Meanwhile, the U.S. faces strong world competition for corn. Brazil has doubled its corn exports since 2004 to become the second largest exporter after the United States. The Ukraine is now the third largest exporter.

Wheat production, USDA projects, will increase slightly to 2.16 billion acres, despite lower yields and fewer acres planted. The increase stems from a much higher harvest ratio. Last year’s ratio was the lowest since 2002 due to persistent drought and spring freezes in the Southern and Central Plains.

The government isn’t projecting much of an increase in wheat ending stocks. But Ash said that reduced domestic demand for feed, coupled with strong competition from foreign sources, would lead to a decline in prices. The outlook calls for wheat prices to average $5.30 this year, down $1.50 from last year.

U.S. wheat growers face stiff foreign competition, led by Canada, Ash said. Supplies from most major exporting countries in 2014 are expected to be on par with 2013, according the outlook.

USDA projects that soybean supplies during the 2014/15 marketing year will reach a record 3.7 billion bushels, up 7% from the previous year mostly on higher production. Large global stocks will pressure soybean prices, said Ash, adding that he’s unsure when these stocks can be worked down.