Expectations for the April World Agricultural Supply and Demand Estimates (WASDE) released by the Agriculture Department were for a slight reduction in the corn supply from last month due to increasing use for ethanol, but USDA pegged the corn supply at 5% of total usage, the same as the March report.
“A 5% stocks-to-use ratio is still historically low,” explained Todd Davis, crops economist with the American Farm Bureau Federation. “That represents just 18 days of supply, so we’re still going to need a big 2011 corn crop because we don’t expect any drop in total use this year.
“USDA released its prospective plantings report showing farmers intend to plant 92.2 million acres of corn this year, which would be the second largest corn acreage since 1944. This shows that farmers are going to step up to the plate and produce the corn that the market is calling for. The market needs corn this year and farmers will deliver.”
Davis said a big corn crop is required to build supplies and to meet growing demand for ethanol, feed and other uses.
“We can’t afford a short crop this year,” Davis said. “We need big yields and strong production in all growing regions.”
In the April WASDE report, USDA lowered its estimated feed/residual use by 50 million bushels, which was offset by a 50-million bushel increase in corn used for ethanol. That fact explains the unchanged 5% stocks level, according to Davis. The April WASDE pegs corn ending stocks for the 2010/2011 marketing year at 675 million bushels, the same as in March.
“Today’s WASDE confirms that corn supply and use is still very tight,” Davis said. “We’re also seeing tight cotton supplies, which means we’re also going to need a big cotton crop this year. We are going to be seeing a lot of interplay between the various crops this year. Production changes in one commodity will impact prices of the other commodities, so we’re going to need cooperative weather all across the country to meet strong demand for cotton, corn and wheat.”
USDA lowered U.S. corn feed and residual use by 50 million bushels, partially due to increased prospects for soft red wheat (SRW) production. In its March 31 Prospective Plantings report, USDA indicated a 55% increase in SRW planted area compared to 2009/10, a marketing year when SRW harvested area was down about 30% below its five-year average. The April WASDE noted that the weighted average of early April crop conditions in the SRW states (mainly east of the Mississippi River) shows the highest percent of SRW in good-to-excellent condition since 2006/07.
With high demand and very low corn stocks predicted, the cash and futures price spread between corn and SRW has narrowed significantly, creating additional opportunities for wheat to replace higher priced corn in domestic feeding rations. Global wheat ending stocks for 2010/11 are now projected slightly higher to 182.83 MMT.
In terms of price predictions, the average price U.S. farmers will receive for corn during the current marketing year was raised a nickel, to $5.45 per bushel, still well below the price level of speculative corn futures. The U.S. season-average soybean price range is projected at $11.25 to $11.75 per bushel, up 15 cents on the bottom and down 35 cents on the top of the range. The marketing-year average wheat price received by producers is projected 10 cents lower on each end of the range at $5.50 to $5.70 per bushel.