The corn-crop estimate USDA published in August is nearly 1 billion bushels smaller than last year’s record crop, but it is 300 million bushels more than the market anticipated. Those extra bushels mean the corn
market has a lot of cushion to work with even if the crop estimate declines from USDA’s initial forecast.
The beginning stocks increase of 633 million bushels—a 36.4% year-over-year increase—adds even more cushion on the supply side of the 2017/18 balance sheet. Therefore, total supplies in the new-crop marketing year are projected to be down just 367 million bushels, or 2.2%, despite the estimated 6.6% decline in crop size.
USDA projects a decline in total corn use of 270 million bushels, or 1.9%, for the 2017/18 marketing year. Modest growth is projected for feed and residual use. Increasing animal units will raise the feed component, but a smaller crop will reduce residual use. A 1.2% increase is also projected for food, seed and industrial use, with the ethanol grind forecast to rise 0.9%.
Exports Lag. The hit to corn demand will come from exports. U.S. corn exports are forecast to plunge 375 million bushels, or 16.9%, during 2017/18 amid increased competition from Brazil and Argentina. Based on the sales pace through early August, corn exports have ground to make up. New-crop outstanding sales are running 44.1% behind year-ago and 34.5% behind the five-year average. If export demand slows at all during the first half of the new-crop marketing year, USDA might have to downwardly revise its already reduced export forecast.
With use forecast to decline less than total supplies, corn carryover is projected to tighten. But new-crop ending stocks at 2.27 billion bushels as of the August crop report are still very comfortable. Nearly 500 million bushels would have to be shaved off that figure through a smaller crop estimate, increased demand or both to pull corn carryover down from what the market considers to be plentiful. And ending stocks would need to drop nearly 800 million bushels before they would be considered borderline tight.
Soybeans Swell. The Aug. 1 soybean estimate from USDA is 170 million bushels higher than anticipated and 74 million bushels above last year’s record crop. That pushed projected total supplies for the 2017/18 marketing year up 249 million bushels, or 5.5%, from last year to nearly 4.8 billion bushels. Although global soybean demand driven by China continues to grow, that’s a lot of soybeans the…