World corn stocks forecast to rise

First, a note about the markets data on page 78.

We rejigged the layout to make room to provide a window on grain movement, a hot topic this year.

At the bottom of the page you’ll see weekly total bulk grain shipments from elevators in each of the three prairie provinces, plus the total to date for the crop year.

The exchange rate for the Canadian dollar is now in a box on the left side of the page.

Data on fed cattle cash-to-futures basis and Alberta-to-Nebraska cash basis can be found in the Canfax report on page nine.

Now, let’s look at the U.S. Department of Agriculture monthly supply and demand report issued May 9.

The only surprise was the increase for current year-end global corn stocks and the forecast for another increase next year.

The USDA pegged 2013-14 world corn ending stocks at 168.42 million tonnes, up 10 million from April and above a range of estimates.

For next crop year, it sees corn stocks rising to 181.73 million tonnes. That, too, was above the range of traders’ expectations of 149.90 to 175 million tonnes.

The 2014-15 forecast is the most since 1999-2000 and, on a stocks-to-use ratio measure, is the most since 2008-09.

The USDA put the 2014-15 average corn price for U.S. farmers at a range of $3.85 to $4.55 US per bushel, down from $4.50 to $4.80 in the current crop year.

Based on the USDA’s forecast, the global stocks-to-use ratio would increase to 18.8 percent, or the equivalent of 69 days of supply. As recently at 2010-11 it was at about 57 days supply.

Over the past 40 years, the lowest amount was 55 days.

New crop December corn futures fell about 2.5 percent on the day of the USDA report and a further 1.35 percent May 12.

The increase in year-end stocks is not the result of bigger crops. The USDA pegged global corn production in 2014-15 at 979.08 million tonnes, almost identical to the current year.

It cut Ukraine’s corn production by five million tonnes to 26 million on account of the political turmoil and in line with analysts’ expectations. That cut is offset by increased crop forecasts for China, Argentina and Mexico.

Production exceeded demand in the current year by a little more than 30 million tonnes.

In the coming year, demand will increase 1.8 percent but is expected to still fall short of production, causing year end stocks to rise 13.3 million tonnes if the USDA forecasts are correct.

So there will likely be ample corn in the world if there are no weather surprises. U.S. Midwest seeding progress has caught up to the norm, and that also could weigh on prices.

However, it is also worth noting that the USDA based its domestic production forecast on a record yield of 165.3 bushels an acre. Actual yields have fallen short of the early forecast for the past four years and in six of the past 10 years.

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