Market Outlook: Large corn inventories don’t bode well for price outlook
Dr. Jim Hilker
The November USDA/NASS Crop Production Report showed U.S. 2018 corn production to be 14.6 billion bushels, down 1% from the October estimate. It would still be the second largest crop on record, just below the 2016 record of 2016 of 15.1 billion bushels.
Yields are expected to average a record 178.9 bu/ac, down 1.8 from the October forecast, but 2.3 bushels higher than 2017, which had the second highest yield on record. The area harvested for grain is forecast at 81.8 million acres, down from the 92.7 million acres harvested in 2017. The U.S. has had its six largest corn crops the past six years.
The November 11 NASS Weekly Crop Progress Report showed 84% of the corn had been harvested - 3% higher than last year but 3% below the 2013-17 average. Quality of the remaining corn has dropped off since the data was collected for the November report. Expect the January Final 2018 Crop Production Report to be lower, but we still have a lot of corn.
Michigan’s corn production forecast was 315.4 million bushels of corn, up 5.4 million from the October forecast, and is based on 2.4 million planted acres, with 1.9 million harvested for grain acres, and a projected yield of 166 bu/ac. The 166 bushel average yield would be a record, beating out the 162 recorded in 2015, but I expect the final figure will be lower due to deteriorating crop conditions. As of November 11, Michigan had harvested 67% of the corn acres, about the same as last year and the five year average.
The updated November USDA World Agricultural Supply and Demand Estimates were also released November 11. U.S. total 2018-19 supply was lowered 152 million bushels due to the lower production estimate discussed above. Feed and residual use was lowered 50 million bushels based on the lower production and higher projected price. Projected exports were lowered 25 million bushels as projected 2018-19 world corn production was increased 30 million bushels.
Overall, projected ending stocks were lowered 77 million bushels from October to November to 1,736 million bushels, 11.5% of use. Which puts 2018-19 ending stocks 404 million bushels below the 2017-18 marketing year, with its ending stocks to use of 14/5%. The USDA is projecting a 2018-19 average corn price with a midpoint of $3.60/bu, up $0.10 from last month, up $0.24 from 2017-18. All the numbers can be seen in Table 1 below.
The prices we are seeing – both current and forward bids – match up pretty well with the fundamentals. The harvest basis, relative to out months, is strongly suggesting on-farm storage will pay, but paying for commercial storage is a close call.