Studying corn demand versus intended acres
URBANA, Ill. (University of Illinois) – The U.S. Department of Agriculture’s Grain Stocks report released March 31 provides an opportunity to assess the progress of corn consumption during the current marketing year and to re-evaluate prospects for the magnitude of year-ending stocks.
In addition, the Prospective Plantings report, also released on March 31, provides an opportunity to evaluate the potential size of the 2016 corn crop.
According to University of Illinois agricultural economist Darrel Good, March 1 corn stocks were estimated at 7.8 billion bushels. The stocks estimate allows for a calculation of feed and residual use of corn during the second quarter of the 2015-16 marketing year.
Total disappearance during the quarter was 3.45 bb. Exports during the quarter are estimated at 334 million bushels, although the Census export estimate for February 2016 to be released on April 5 will allow for a more accurate estimate for the quarter.
Corn used for ethanol and co-product production during the quarter totaled 1.3 bb. Corn processed domestically for other food and industrial products was likely near 335 mb.
“The remaining disappearance, estimated at 1.468 bb, is allocated to the feed and residual category,” Good said. “Feed and residual use during the first half of the marketing year is estimated at 3.64 bb.
“Use during the first half of the 2015-16 marketing year represents 68.7 percent of the current USDA projection of 5.3 bb to be used during the entire year.
“With 22 weeks left in the year,” he said, “corn exports need to average about 38.6 mb per week to reach the projected level for the year.
“Weekly inspections averaged 40.1 million bushels per week for the three weeks that ended March 31. With the accelerated pace of shipments and current unshipped sales of 504 million bushels, exports should reach the projected level.”
The USDA projects 2015-16 marketing-year use of corn for ethanol and co-products at 5.2 bb, 0.5 percent more than used last year.
Estimates provided by the USDA’s Grain Crushings and Co-Products Production report indicate that 2.6 bb were used for that purpose during the first half of the marketing year, 1.7 percent more than during the same period last year.
In addition, sorghum used for ethanol production during the first half of the year exceeded that of a year ago by about 50 million bushels. Ethanol production in March 2016 exceeded that of a year ago by nearly 4.5 percent.
“With domestic gasoline consumption continuing well above the level of a year ago and with ethanol exports remaining strong, it appears that ethanol production and corn use could exceed the current USDA projection,” Good said. “Even with increased use of sorghum, it appears that corn used for ethanol and co-product production could reach or exceed 5.25 bb.
“Year-ending stocks of corn might be 25 mb less than the current USDA projection of 1.83 bb.”
Corn producers reported intentions to plant 93.6 million acres of corn this year, 5.6 million more than planted last year. Increased corn (and cotton) acreage is planned at the expense of wheat and oilseeds.
“The surprising acreage intentions resulted in continued adjustment in corn, soybean, and spring wheat prices following the release of the report,” Good said.
From Feb. 22, when the USDA initiated the month-long acreage survey process, through April 1, December 2016 corn futures declined by 21 cents, November 2016 soybean futures increased by 41 cents, and July 2016 spring wheat futures increased by 32 cents.
“The changing price relationships suggest that some producers may plant less corn acreage and more acreage of other crops than reported in March,” Good said. “After all, one of the main objectives of the acreage survey is to provide producers with information to re-evaluate their plans.
“In addition to the allocation of acreage to individual crops, the magnitude of total planted acreage in 2016 is still in question,” Good said.
The USDA estimates that acreage planted to principal crops in 2016 will total 317.3 million acres, 1.2 million less than planted last year and 9.1 million less than planted in 2014.
“The planned reduction in total planted acreage from that of a year ago is somewhat of a surprise because 6.7 million acres were reported as ‘prevent plant’ in 2015,” Good said. “It would not be a complete surprise if total planted acreage exceeded March intentions.
“With the continued uncertainty about the magnitude of total planted acreage and the mix of crops, expectations for corn acreage and production will remain in a wide range.
“For example, planted acreage of 93.6 million acres, harvested acreage of 86 million acres, and an average yield near the USDA’s calculated trend of 168 bushels would result in a crop of 14.448 billion bushels and 2016-17 marketing year-ending stocks near 2.4 bb.
“Alternatively, planted acreage of 92 million, harvested acreage of 84.4 million, and a yield of 162 bushels resulting from stressful summer weather as the current El Nino episode fades would result in a crop of only 13.689 bb and 2016-17 marketing year-ending stocks near 1.7 bb.”
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