Building Back Corn Reserves
Despite all the bullish news in corn over the past weeks, as we close in on the end of February, the May 2021 futures contract is about unchanged on the month yet new crop December has scored new contract highs almost on a daily basis.
In this regard we sense the markets are starting to shift more from concern about tightness of supplies due to robust demand towards how difficult a task it will be to rebuild inventories to more comfortable levels for this season as this is a more than one year fix.
As we did with soybeans in an earlier post whose situation may be more critical than that of corn, this matrix showing prospective 2021/22 U.S. corn ending stocks in million bushels with various combinations of planted area and yields.
Numbers in cells are beginning stocks which is the February 2021 WASDE figure of 1.502 billion bushels (bb) and to that we add this year production which is planted acreage going across the top on the x-axis the 2021 USDA harvested/planted ratio of 91.74% times prospective yields going down on the y axis in bushels per acre.
To that we add the 25 million bushels (mb) of imports the USDA projected as per their updated 2021/22 corn balance sheet and from that total supply the updated USDA Ag Outlook Forum demand figure of 15.125 billion bushels is subtracted.
USDA projects corn area will expand by 1 million acres to 92 million, the highest since 2016 with their yield calculation at 179.5 bushels per acre (bpa) a new record exceeding the prior high of 176.6 bpa and a hefty 7.5 gain on last year's result.
Even with this the carryout for the 2021/22 season is seen increasing by a mere 50 mb to 1.552 bb with the still same tight 10.3% stock to use ratio as this year, the tightest since the 2013/14 season.
As you can see from the graphic we will need quite a combination of high acreage and yields to build stocks up above 1.50 bb.
Some feel USDA may be too low on their acreage estimates with trade guesses anywhere from 93-94 million especially with a faster start to spring seedings than seen the past two years anticipated.
Counter-balancing that however are widespread thoughts that USDA export projections for both this year and next look to be understated by anywhere from 100-200 mb meaning lower beginning stocks and higher demand figures than used in our calculations.
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