Fundamentally Speaking

From the May WASDE report to the one issued September 2018, the USDA has boosted U.S. corn production estimates from 14.040 billion bushels to 14.827 bln. This is a 787 million increase on the heels of a forecasted record U.S. yield.

Interestingly despite this sizable jump in projected output, 2018/19 U.S. ending stocks, which were pegged at 1.683 billion bushels in May, are now estimated at 1.774 billion bushels, a mere 91 million bushel increase. As one would expect, the reason for this is higher demand projections with total offtake now seen at 15.105 billion bushels, a substantial 515 million increase from projections just four months ago.

Final demand for this year could prove to be even higher for the increase in projected exports from the May to September WASDE was 300 million bushels to 2.40 billion, yet a very low level of foreign corn and coarse grain production suggests that outlook for U.S. overseas corn sales is even brighter.

This graphic shows the world corn and coarse grain stock to use ratios with and without China. The reason we exclude China is they possess the world's largest ending stocks of both corn and coarse grains which besides corn includes sorghum, barley, oats, millet, mixed grains and rye, but they are not major players in the global corn or coarse grain trade.

The 2018/19 world corn stock to use ratio is currently pegged at 14.3%, which is just above the recent low of 14.2% seen in the 2010/11 season and the only time it was lower was in the 1972-74 period of tight global grain stocks and record prices prevailing at that time. The global coarse grain stock to use ratio this year is pegged at 12.9% and the only time it was lower also back in that 1972-74 timeframe.

Looking at the situation without China, the world corn stock to use ratio is 11.6% which though very low was even lower in the 2010-13 period though again the lowest ratio was seen in the 1995/96 marketing year at 7.7%. Finally the world less China coarse grain stock to use ratio was projected earlier this month at 10.7% which is the lowest since the 2011-13 period and prior to that also the 1995/96 season with an absolute low of 8.1%.

World coarse grain production was pared sharply last year in Russia, Ukraine. Europe, Argentina and Brazil and this is expected to boost U.S. corn exports to perhaps record levels as many feel our final export figure could be in excess of 2.60 billion bushels, 200 million more than recently projected.

Joel Karlin, Western Milling

(KA)

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