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Record US Corn Crop And Stronger Loonie To Weigh On Prices

on September 29 | in Ag News | by | with No Comments

Agriculture and Agri-Food Canada market analysts predict that a “multi-year recovery” is needed to bounce back from the huge U.S. corn crop that is coming for 2016-17. The comment was made in AAFC’s Outlook for Principal Field Crops report that was released on Sept. 1.

Calling it the main market driver, the analysts say the U.S. crop will achieve all-time records in yield, production, total supply and usage if the USDA’s projections are realized. U.S. corn ending stocks will grow by 16% from 2015-16 and, although these will not be at record levels, they will be at a 29-year high.

The U.S. corn farm gate price is projected to be at its lowest level in 11 years, declining to US $3.15/bushel (bu) for 2016-17. “To put this into perspective, if the 2017-18 US corn area was similar to 2016-17, a U.S. corn yield of below 159 bushels/acre would be required just to get ending stocks below 2 billion bushels,” said the AAFC analysts in the report. “This would allow some price appreciation. However, U.S. corn at $4/bu is still a long way off. It would take a major drought in the U.S. Corn Belt in future years to achieve any sort of meaningful corn price increase.”

As for Canada, production in 2016-17 is forecast to decrease 9% to 12.3 Mt; the slightly higher area was more than offset by the lower total average yield, slightly below the previous five-year average. Total domestic usage is forecast to increase slightly by 3% due to trend increases in ethanol production, industrial use and livestock feeding. Exports are forecast to decrease to 1.0 Mt due to the lower supply, strong competition from the major corn exporting countries and a slightly stronger Canadian dollar.

Carry-out stocks are forecast to decrease by 33% to 1.3 Mt, below the previous five and ten-year averages. The Chatham corn price is forecast to decrease from 2015-16 due to the ample supplies, a softer US corn future’s price and the strengthening Canadian dollar.

Soybeans – 2016-17

Given the Statistics Canada estimate for lower production due to the hot and dry growing conditions in Ontario and Quebec, supplies are forecast to fall by over 0.5 Mt as a draw down in carry-in stocks supplements the fall in output.

Domestic crush is forecast to decline slightly to historically normal levels under pressure from expected burdensome world soyoil and soymeal supplies. The export forecast was raised slightly from the last Supply & Demand release, but is expected to fall from last year’s levels on tighter domestic supplies. Carry-out stocks are expected to remain unchanged at 0.335 Mt.

Soybean prices are forecast to increase from last year to $460 to $500/t. The world outlook for soybean markets weakened over mid to late summer on good U.S. soybean growing conditions.

The U.S. soybean crop has consistently rated more than 70% good to excellent throughout the summer, and the USDA is forecasting a crop in excess of 4.0 billion bushels, setting a new record.

South American production is forecast to remain near last year’s level. This increase in world supplies is forecast to be largely offset by a 12 Mt increase in world soybean crush. The largest rise in usage is forecast to occur in China, with processing also expected to increase in India and Egypt.

Wheat (excluding durum) 

The average crop year producer price in Canada for wheat is forecast to decrease from 2015-16 because support from the lower Canadian supply is expected to be more than offset by the higher U.S. and world supply and the forecast for a stronger Canadian dollar.

Canadian production is estimated to increase by 7% to 23.7 Mt because of higher yields. Supply is estimated to fall by 5% as the rise in production is more than offset by lower carry-in stocks. Exports are forecast to fall by 8% to 16 Mt because of the lower supply. Carry-out stocks are forecast to fall by 6% to 3 Mt.

World all wheat (including durum) production is forecast to increase by 8 Mt to 743 Mt. Supply is forecast to rise by 34 Mt to 985 Mt. Total use is expected to increase by 24 Mt to 733 Mt. Carry-out stocks are forecast to rise by 11 Mt to 253 Mt.

The area seeded to wheat in the U.S. fell by 7% from 2015-16. Production is estimated to increase by 7.3 Mt to 63.2 Mt, with a 27% increase for hard red winter and white wheat, a 4% increase for soft red winter wheat and a 6% decrease for hard red spring wheat. Supply is estimated to rise by 13.6 Mt to 93Mt. Domestic use is expected to rise by 5.6 Mt and exports are forecast to rise by 4.8 Mt. Carry-out stocks are forecast to increase by 3.2 Mt to 29.9 Mt.

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