- Special Report by Mark Welch and Kurt Guidry -
Editor’s Note: Mark Welch is a Texas AgriLife Extension economist, The opinions and recommendations expressed are solely those of the author and are intended for educational purposes only as part of the Texas AgriLife Extension Service. Texas AgriLife Extension Service assumes no liability for the use of this information. Welch’s report was released on Sept. 12, 2013. Kurt Guidry is an LSU AgCenter economist in the Department of Agricultural Economics and Agribusiness. His report was released on Sept. 17, 2013.
USDA made upward revisions to old crop corn use and new crop corn supplies in the Sept. 12 World Agricultural Supply and Demand Estimates. Ending stocks in the 2012/2013 marketing year were cut by 58 million bushels on increased feed use (+25 million bushels), fuel use (+15 million bushels) and exports (+20 million bushels).
The lower carryover from last year, the beginning stocks number for 2013/2014, was offset by an increase in corn production, +80 million bushels. USDA left planted and harvested area unchanged but increased corn yields from 154.4 bushels per acre last month to 155.3. The net increase in new crop corn supplies is 18 million bushels; no changes were made to the use side of the balance sheet.
World corn production and use numbers were little changed. Supplies are down on lower stocks (-0.5 mmt) and lower production (-0.5 mmt). Domestic use was cut 2.3 mmt leaving ending stocks higher by 1.3 mmt. Days of use on hand at the end of the marketing year increased this month to a 59.6 day supply from 58.9 in August, right at the 10-year average.
The condition rating of U.S. corn declined again this week. The poor and fair categories both increased by one percentage point and good and excellent declined like amounts; very poor was unchanged. The condition index declined 4 points to 345. The average crop index score for this time of year is 353, the normal low of the season.
Last week’s employment report was disappointing. While job growth was in line with many analysts expectations, job increases for June and July were lowered by 74,000. The unemployment percentage went down to 7.3 percent, more from fewer people looking for work than increasing employment possibilities.
2013 Marketing Plan
I have completed my pre-harvest sales and will price the remaining 20 percent at harvest. Texas cash grain basis levels fell off this week but are still above average. In the central Texas panhandle the fiveyear average basis for September corn sales relative to the December contract is +$0.08/bushel, with a low of -$0.17 and a high of +$0.41. The basis last week was +$1.12 and stands at +$0.52 today.
For Texas basis information on corn, cotton, grain sorghum, soybeans and wheat see our Basis Project at http://agecoext.tamu.edu/programs/marketing/master-marketerprogram/basis-website.html.
Kurt Guidry’s Corn Market Update
After making a move back to the $5.00-per-bushel range on weather and crop development concerns in late July, new crop corn futures prices have fallen back to the mid $4.00 per bushel range. An improvement in weather conditions and better-than-expected results from several yield tours conducted throughout the Midwest gave the market more confidence about yield potential and overall 2013 production levels.
The latest USDA Supply and Demand report seemed to reaffirm this as yields were raised by nearly one bushel per acre and well above the five-year average. The only other change made in the September report was a reduction in beginning stocks for the 2013/14 marketing year based on better-than-expected exports to end the 2012/13 marketing year. Despite the reduction in beginning stocks, the increased production estimate resulted in ending stocks being pegged at a very comfortable 1.85 billion bushels, up 18 million bushels from the August estimate.
Uncertainty About Total Supplies
While it would seem that the market has become increasingly more confident about the potential size of the 2013 crop, this doesn’t mean that there isn’t some uncertainty regarding total supplies for 2013. The Farm Service Agency released on Sept. 16 that 3.57 million acres of corn were prevented from being planted in 2013. This is up slightly from the estimates they released in August.
In addition, there are some market analysts that still suggest that yields may be overestimated as yield tours held earlier this year did not reflect many of the impacted areas. Just how much these issues impact future supply and demand estimates is unknown. But what it does do, however, is still provide some uncertainty and risk potential in the market.
Brief Spike In Prices?
While there could be some adjustments made in the total supply numbers in future USDA reports, the general sentiment is that regardless of what adjustments are made, the 2013 crop is likely to be a large one. And, without a widespread frost or freeze or unexpected shocks in demand, it appears as though the market will settle in the low to mid $4.00-per-bushel range.
While the uncertainty in the market that exists could create some momentary spike in prices back to the $5.00 range, without some significant adjustments made to either the supply or demand side of the equation, it would appear that ending stocks for the 2013/14 marketing year are heading for levels around the 1.5-billion bushel level, and that prices are destined to settle in the low $4.00 range.