The USDA World Agricultural Supply and Demand Estimates (WASDE) Report released on May 10 was regarded as mainly neutral to bearish for the corn market, and bullish for the soybean market in the coming months. The May report showed slightly lower corn ending stocks for 2015-16, and significantly lower soybean ending stocks, as compared to the April Report. Corn stocks are expected to show a 19 percent increase by the end of the 2016-17 marketing year, while the ending stocks for soybeans are expected to decrease by 24 percent during that time. Following are some highlights of the latest USDA WASDE Report.
According to the May 12 USDA WASDE Report, the projected corn ending stocks for the 2015-2016 year, which ends on August 31, 2016, are estimated at 1.803 billion bushels, which was decreased by 59 million bushels compared to the April report. The 2015-16 level of corn ending stocks would be at the highest level since the carryover of 1.97 billion bushels for 2005-06. The 2015-16 level of corn ending stocks compares 1.731 billion bushels in 2014-15, 1.232 billion bushels in 2013-14, and 821 million bushels in 2012-13. USDA is projecting that total U.S. corn use for 2015-2016 will be 13.585 billion bushels for livestock feed, ethanol, food products, seed, exports, etc., which is up slightly from 13.454 billion bushels in 2013-14. The large level of the corn supply in the 2015-16 marketing year has put downward pressure on corn market prices; however, there has been some modest improvement in cash corn prices in recent weeks.
Based on the most recent WASDE Report, USDA is projecting the corn ending stocks to be 2.153 billion bushels by the end of the 2016-17 marketing year, which is an increase of 105 million bushels over 2015-16 levels, and would be at the highest level since the mid-1980s. The important ending stocks-to-use ratio for corn is projected to increase to a level of 15.2% by the end of 2016-17, compared to 13.3% for 2015-16, 12.6% for 2014-15, and 9.2% in 2013-14. USDA is projecting total corn usage for 2016-17 at 14.12 billion bushels, which is an increase of 535 million bushels from 2015-16 usage levels, mainly driven by an expected increase in feed usage and export demand. Corn use for ethanol production in 2016-17 is estimated at 5.3 billion bushels, which is a slight increase.
USDA is estimating total U.S. corn production for 2016 to be at 14.43 billion bushels, which would be an increase from a total U.S. production of 13.601 billion bushels in 2015. The Report indicated an estimated 93.6 million acres planted to corn in 2016, which compares to 88 million acres in 2015, 90.6 million acres in 2014, and 95.4 million acres in 2013. USDA is estimating an average U.S. corn yield of 168 bushels per acre in 2016, compared to 168.4 bushels per acre in 2015, and the record U.S. corn yield of 171.0 bushels per acre in 2014. Some analysts are questioning the 2016 yield projection, given the delayed corn planting in portions of the western Corn Belt, and forecasts of a dry weather pattern to develop by late summer in some portions of the prime growing areas.
USDA is now estimating the average U.S on-farm corn price for the 2016-17 marketing year in a range of $3.05 to $3.65 per bushel, or an average price of $3.35 per bushel. This is a decrease from the current 2015-16 estimated average on-farm price of $3.60 per bushel, or the 2014-15 final national average price of $3.70 per bushel. This would be a major decline from the 2013-14 final U.S. average corn price of $4.46 per bushel, or the 2012-13 final average corn price of $6.89 per bushel.
According to the May 10 USDA WASDE Report, the projected soybean ending stocks for 2015-16 are estimated at 400 million bushels, which is still a large figure, but represents a decrease of 45 million bushels from the April soybean carryover estimate. The projected 2015-16 soybean ending stocks level compares to carryover levels of 191 million bushels for 2015-16, 92 million bushels for 2013-14, and 141 million bushels in 2012-13.
Based on the recent report, soybean ending stocks for 2016-17 are estimated at 305 million bushels, which would be a decrease of 95 million bushels below the estimated 2015-16 ending stocks. The soybean ending stocks-to-use ratio for 2016-17 is projected to decrease to approximately 7.8%, which compares to 10.7% for 2015-16, and 4.9% for 2014-15. This estimate is based on a slight decline in soybean acreage and total production in 2016, together with an increase of 175 million bushels in in total soybean demand in 2016-17. The increased demand is mainly due to higher projected export levels and increased bushels for soybean processing.
Total U.S. soybean production in 2016 is estimated at 3.8 billion bushels, which compares to slightly over 3.9 billion bushels in both 2015 and 2014, and 3.6 billion bushels in 2013. Planted soybean acres for 2016 are estimated at 82.2 million acres, compared to 82.7 million acres in 2015, 83.3 million acres in 2014, and 76.8 million acres in 2013. USDA is estimating a national average soybean yield of 46.7 bushels per acre in 2016, which compares to the record U.S. soybean yield of 48 bushels per acre in 2015, and soybean yields of 47.8 bushels per acre in 2014, and 44.0 bushels per acre in 2013.
USDA is estimating the U.S on-farm soybean price for the 2016-17 marketing year in a range from $8.35 to $9.85 per bushel, or an average price of $9.10 per bushel, which compares to a current estimated average farm price of $8.85 per bushel for 2015-16, and final U.S. average soybean prices of $10.10 per bushel in 2014-15, and $13.00 per bushel for 2013-14.
Grain marketing impacts
The large decline in the soybean ending stocks projected for both the 2015-16 and 2016-17 years in the latest USDA WASDE was significantly more than the expectations of most grain marketing analysts and traders. This caused a major spike in both nearby futures prices, as well as in new-crop November soybean futures prices on the Chicago Board of Trade (CBOT), with prices increasing by over 50¢ per bushel on the day of the USDA Report. CBOT cash soybean futures closed at $10.84 per bushel on May 10, which was the highest closing price since late 2014. The cash soybean futures price had modified back to $10.61 per bushel by the opening of the grain markets on May 16. The May 10 USDA report did not have much impact on the corn futures prices.
The recent rise in soybean prices has provided an opportunity for farm operators to sell any remaining inventories of 2015 soybeans, as well as to begin pricing the anticipated 2016 soybean crop. In the past few weeks, local soybean cash prices in the Upper Midwest have been above $9.50 at the soybean processing plants, and between $9.00 and $9.50 per bushel at most local grain elevators. One challenge in marketing soybeans has been the extremely wide basis level, which is the difference between the CBOT futures prices and the local cash price. The current soybean basis at local grain elevators in the Upper Midwest has been running 80¢ to over $1.00 per bushel below the CBOT soybean price. By comparison the basis level was only 20-40¢ per bushel below CBOT prices in May 2014.