The Chicago corn futures market’s response to the Nov. 9 USDA World Agricultural Supply and Demand Estimates report has been lackluster, said Todd Hubbs, University of Illinois agricultural and consumer economist in an examination of the market for Farm Doc Daily.
The report contained significant revisions to Chinese corn supply data and a downward revision of some major consumption categories, but the potential for an even smaller corn crop and continued strong consumption offered price support into 2019.
However, bearish soybean prices and the prospect of acreage shifts next year may prevent corn prices from reaching their full potential under tightening ending stock scenarios, he said.
PRODUCTION FORECAST BELOW ESTIMATES
The US corn production forecast decreased to 14.63 billion bushels, down 152 million from the October forecast, Hubbs said. At 178.9 bushels an acre, the yield decrease of 1.8 bushels came in below pre-report estimates.
Over the last 20 years, a reduction in yield close to that magnitude between October and November occurred in 2000 (-1.9 bushels), 2007 (-1.7 bushels) and 2010 (-1.5 bushels), he said. In each of these instances, the final yield estimate decreased from the November forecast with an average decline of 1.6 bushels an acre.
Projected corn yield reductions were particularly sharp in the northwest region of the Corn Belt, Hubbs said. Iowa and South Dakota projections decreased six bushels an acre, and Minnesota projections fell seven.
In conjunction with lower corn production, projections of corn consumption fell 75 million bushels to 15.08 billion bushels, he said. Ending stocks for the 2018-19 marketing year were reduced to 1.736 billion bushels and placed stocks-to-use projections at 11.5%, down from 12% in the October forecast.
CHINA STOCKS REVISED UP
A significant development in the WASDE report involved the revision of Chinese corn production, consumption and stocks over the last 10 years, Hubbs said. Ending stocks there now sit at 8.17 billion bushels, up from 2.3 billion last month.
China currently holds 67.5% of world corn ending stocks, he said. China also held a large percentage of global wheat ending stocks over the last several years.
The world stocks-to-use ratio exploded to 27.2% in the November report, up from 14.4%, Hubbs said. The removal of Chinese data from the calculation places world stocks to use at 11.7%.
Since Chinese corn exports are minimal, the global demand for corn looks to remain strong for US exports, he said.
LOWER FEED, RESIDUAL USE SEEN
The USDA projected feed and residual use of corn during this marketing year at 5.5 billion bushels, down 50 million from October. At 202 million bushels over the last marketing year, the change is a 3.8% increase, Hubbs said.
The lower-than-expected feed and residual use numbers last marketing year may signal further revisions are coming, he said. The December Grain Stocks report, the second week of January, provides the first quantifiable indication this marketing year.
CATTLE, BEEF RECAP
Cash cattle last week traded at $112 to mostly $114 to $115 per cwt on a live basis and at $178 to mostly $179 to $180 on a dressed basis, both steady to down $1.
The USDA choice cutout Monday was up $0.35 per cwt at $215.55, while select was up $1.67 at $200.39. The choice/select spread narrowed to $15.16 from $16.48 with 66 loads of fabricated product sold into the spot market.
The CME Feeder Cattle index for the seven days ended Friday, was $150.59 per cwt, down $1.04. This compares with Monday’s Nov settlement of $148.37, down $0.63.