Market analysts at Agriculture and Agri-Food Canada expect that Canadian corn production in 2016-17 will decrease 3% to 13.2 Mt due to lower average yields. But according to their Oct. 21 report, the domestic supply is expected to increase because carry-in stocks are at a record level of 2.2 Mt. Imports are forecast to decrease by 25%. Total domestic usage is forecast to increase by 5% due to higher livestock feeding, ethanol production and industrial use. Exports are forecast to decrease to 1.3 Mt due to the strong competition from the major corn exporting countries and a slightly stronger Canadian dollar. Carry-out stocks are forecast to decrease marginally but will remain well-above the previous five and ten-year averages. The Chatham corn price is forecast to decrease from 2015-16 due to the large North American supplies, lower U.S. corn prices and the strengthening of the Canadian dollar.
Meanwhile, the analysts note that the USDA’s September Grain Stocks report had a bullish effect on the U.S. corn futures market. U.S. corn stocks were estimated to be lower than expected which indicated a higher degree of feed usage. Since mid-July, the December 2016 U.S. corn futures contract has been fairly stable but the combination of tighter stocks and slower than average harvest progress has given prices a boost. After many years, starting in May, the U.S. resumed its position as the world leader in corn prices and for 2016-17 the USDA is projecting very strong U.S. corn exports.
Increased international competition is expected from much higher area seeded to corn in Argentina, which reversed its decision to cut its soybean export tax, and the possibility of China entering the world corn market to draw down its burdensome domestic supplies. China, the world’s number two corn producer, generally exports a small volume of corn with a previous five-year average of about 45,000 t. It has recently given export approval to at least two companies which could put downward pressure on corn prices. However, due to long term storage under poor conditions, the quality of its stocks is thought to be fair-to-poor at best.
(Source: Outlook for Principal Field Crops, Oct. 21, 2016, prepared by the Market Analysis Group/Grains and Oilseeds Division of Agriculture and Agri-Food Canada)