A university Agricultural Economist said in a paper Monday that market fundamentals are bearish at the start of the planting season.
Todd Hubbs, agricultural economist at the University of Illinois, wrote in the Extension Agency’s FarmDocDaily that corn prices held steady last week after the bearish World Agricultural Supply and Demand Estimates report projected a 200-million-bushel increase in the 2018-2019 ending stocks.
At 2.035 billion bushels, the current ending stocks projection reflects weakening demand for corn that looks to continue through the second half of the marketing year, Hubbs said.
That weaker corn demand shows up in the pace of exports and export sales over the last couple of months, he said. The USDA’s revised export projection for the year of 2.3 billion bushels is 5.6% smaller than the 2017-18 marketing year.
The total pace of corn exports so far in the current marketing year at 1.26 billion bushels, 14% more than a year earlier, he said. However, weekly export inspections since Feb. 1 have averaged near 36 million bushels, down from the 40-million-bushel average seen from September through January.
WORLD COMPETITION STIFF
Large crops from other exporters look to provide competition in the world market, he said. Current projections of corn production out of Argentina and Brazil sit at 1.9 and 3.8 billion bushels, respectively.
If those projections materialize, corn production in the two countries increased by 1.2 billion bushels from last year, Hubbs said. Abundant crops and lower free-on-board prices in those areas appear set to induce stronger exports from there.
The USDA raised Brazilian and Argentine its export estimate for the 2018-19 marketing year to 1.22 and 1.2 billion bushels respectively, up 604 million bushels over last year’s total, he said. When combined with the 1.16 billion bushels of exports projected out of Ukraine, US corn exports may struggle in the second half of the marketing year.
ETHANOL USE PROJECTION LOWERED
The USDA lowered the projection of corn used for ethanol production by 50 million bushels, to 5.5 billion, Hubbs said. Plus, plant operating margins improved slightly over the last few weeks but still sit in the red.
Increased gasoline demand and higher pump prices going into the summer should help expand corn use for ethanol, he said. And export data through January provided by the EIA were 125 million gallons more than last marketing year’s pace.
The current pace of ethanol exports appears set to eclipse the record total of 1.636 billion gallons in the previous marketing year, Hubbs said.
If ethanol production picks up due to an increase in gasoline demand and strong exports, corn use for ethanol could exceed the current projection. However, the total use appears set to be close to the USDA forecast.
CATTLE, BEEF RECAP
Cash cattle trading last week was reported at $124 to $128 per cwt on a live basis, steady to up $4 from the previous week, and at $204 to $205 dressed, steady to up $1 from the bulk of the previous week’s trade.
The USDA choice cutout Monday was up $2.23 per cwt at $230/98, while select was up $0.20 at $221.22. The choice/select spread widened to $9.76 from $7.82 with 66 loads of fabricated product sold into the spot market.
There were no tenders Monday for deliveries against the Apr futures contract. However, there were 20 heifer retenders at one, and 30 heifer retenders at 2. There were no demands at zero, 20 heifer demands at one and 30 heifer demands at two.
The CME Feeder Cattle index for the seven days ended Friday, was $142.99 per cwt, up $0.21. This compares with Monday’s Apr contract settlement of $145.67, up $0.25.