Fundamentally Speaking

Greatest Unknowns: Corn Final Yields & Exports

Joel Karlin
By  Joel Karlin , DTN Contributing Analyst

Since bottoming on July 12th, corn futures have had a decent rally moving up at least 30 cents on fund short covering, support from falling coarse grain production estimates in the European Union and Black Sea regions and ending stock and stock to use ratio projections that are now the lowest in five years.

This piece focuses on the last point, that is the 2018/19 ending stocks figure that is at least 130 million bushels below USDA's initial 1.682 billion bushel projection given in the May 2018 WASDE report.

This piece shows the prospective 2018/19 U.S. corn ending stocks figure in million bushels based on changing yield estimates in bushels per acre (bpa) going up and down the y-axis and various export projections going across the x-axis at the top, also in million bushels.

The assumptions include a number of figures contained in the last WASDE report including beginning stocks of 2.027 billion bushels, projected imports for the upcoming marketing year of 50 million bushels and total domestic estimated demand next year of 12.530 billion bushels composed of feed/residual usage of 5.425 billion bushels and total food-seed-industrial (FSI) utilization of 7.105 billion.

Production is based on the June 29th USDA corn harvested figure of 81.8 million acres as seen in the Acreage report.

As far as yield, USDA has been using a figure of 174.0 bpa.

Based on generally favorable weather conditions in much of the Corn Belt this year, reflected by rather lofty crop ratings, we feel the trade is using a higher yield, perhaps along the lines of 177-178 bpa.

On the other hand, it is becoming increasingly apparent that given the lowest world corn stocks-to-use ratio ever based on falling output in such key countries as Argentina, Brazil, Russia and Ukraine that the current USDA 2018/19 export projection of 2.225 billion bushels, which is actually 175 million below this year, is far too low.

Increasingly the trade is wondering not only whether U.S. exports will exceed this year but possibly become the highest of all time topping the prior peak of 2.437 billion bushels seen in the 2007/08 season.

The highlighted blue cell reflects the latest USDA ending stocks figure of 1.555 billion bushels based on the current yield estimate of 174 bpa and an export figure of 2.225 billion.

The point here is while USDA may be too low on yields, the extra production is more than likely to be sopped up by additional overseas demand for U.S. corn.



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