Details of domestic feed grain production and international supply were released in the US Department of Agriculture’s (USDA) April World Economic Supply and Demand Estimate report on Tuesday.
Both US corn and soybeans benefited last year from a drop in production and exports from South America, but this year the feed grains may see more challenges in the export market, said Todd Davis, assistant extension professor of crop economics marketing and management at the University of Kentucky.
“Between the two crops, soybeans are positioned to have a harder time pricewise,” he told FeedNavigator. “With a large crop in South America and big crop in North America, soybeans could have some problems pricewise, and corn could be positioned to draw down stocks or be about the same as the year before – which is optimistic.”
The next area to watch will be the information in the weekly crop progress reports tracking planting and crop conditions once they emerge, he said.
“The story is, if it’s really good planting weather do they keep planting corn? Or, if it’s wet, how many acres intended for corn switch to soybeans?” he said. “And that’s kind of the story at this point.”
Corn market potential
US corn use in 2016/17 has increased for ethanol production and lowered for feed and residual use, said the USDA. Ethanol crush was at a record high during the December-February period, while the amount used in feed dropped to about 5.5bn bushels
Ending stocks in the US have remained consistent and the range for the season average corn price has narrowed to $3.25 to $3.55 a bushel, the department said.
“[With] corn we’re looking at potentially losing acres, and at trend yield, that could have us reducing stocks,” said Davis. “So in the two crops, corn is in a potentially better scenario to chew through some of these stocks.”
Global production for Brazil and Argentina has increased based on planted acres and yield, said the USDA. Mexico, Indonesia, Pakistan and South Africa also are expected to see a bump in production, while amounts fall for Paraguay, Ecuador and Russia.
Imports have increased for Mexico and lowered for Indonesia, Venezuela, Philippines and Colombia, the department said. And, ending stocks for foreign corn also have been raised.
Additionally, export predictions for Brazil and Argentina have increased and they are expected to offer increased competition and influence the marketing year 2017/18 for the US, said the USDA.
Soybean market concerns
Higher ending stocks, reduced disappearance and improved seed use are expected for US soybeans in 2016/17, said the USDA. Seed use is being driven by record predicted plantings.
Ending stocks have been increased by 10m bushels to 445m bushels, but soybean meal is predicted to have improved exports but reduced domestic use, the department said. Projected prices for soybeans have been reduced and soybean meal prices are expected to drop by $5 at the midpoint to a range of $310 to $330 a short ton.
Even without record yields, there could still be a large supply of soybeans coming with the increase in acres to be planted, said Davis. However, farmers may have opportunities to lock in better prices if there are periods of weather concern.
“That paints a pessimistic picture for ending stocks, but we’re just getting started with planting,” he said. “There’s always the [weather] news – it’s too hot or too dry – and that will perk up the [price] movement, but it might be a fleeting market.”
Additionally, there continues to be a strong demand from China for protein, and protein meals including soybeans, he said. However, if yields are strong and the crop in South America reaches potential, it could mean prices challenges and a rise in ending stocks for soybeans.
Globally, there has been an improved supply and demand forecast with increased production, exports, crush and ending stocks, the USDA said. Soybean production has been raised by 5m tons from production in Brazil, Paraguay, Uruguay and Argentina and exports were increased by 2.2m tons to 143.3m.
The EU and China are forecast to have higher imports, the departments said. Meal production was increased by 0.3m tons, but stocks are predicted to grow by 0.9m tons.
Wheat stocks and market
Ending stocks also rose for wheat for 2016/17, said the USDA. A drop in feed and residual use increased amounts by about 30m bushes to 1.159bn and a near 30-year high.
Feed and residual use dropped by about 35m bushels to overall use of 190m bushels, based on a slower disappearance rate than expected for recent quarters, the department said.
“The market has been sending signals to reduce production and last year we had a record wheat yield despite efforts to reduce,” said Davis. “We’ll see what Mother Nature provides.”
Use for the crop has been sluggish and a large amount remains in storage, he said. The US also has dropped market share for wheat exports from former levels as there has been strong international competition.
Global wheat supplies were increased by 1.7m tons based on both higher beginning stocks and a 0.3m ton bump in production, the USDA said. There was a 1.4m ton drop in domestic use in 2015/16 – primarily in the EU.
Global exports also dropped for several countries including Australia, Canada, Kazakhstan and Russia, the USDA said. But, the EU and Ukraine had improved export predictions.
Total global consumption for 2016/17 dropped, with a 1m ton decrease from the US, the department said. And, overall ending stocks were increased by 2.3m tons to 252.3m.