Stocks to use calculations for U.S. and world corn were tighter in the June World Agricultural Supply and Demand Estimates released Tuesday. Wheat U.S. ending stocks were down slightly compared to last year with a small increase globally.
These changes could affect typical seasonal marketing trends, says a Texas A&M AgriLife Extension grain marketing specialist.
Dr. Mark Welch, College Station, says the seasonal price pattern for December corn “shows that prices tend to have upward momentum early in the year then drop below the yearly average about the first of July. If tighter carryout projections hold, I do not expect the same amount of downside price risk as the past few years.”
For wheat, he says a typical seasonal pattern for July Kansas City wheat would have market down in the bottom 10 percent of prices going into harvest. “Instead, prices are just about at the midpoint of the trading range since last May.”
Welch, in a marketing update newsletter released Wednesday, says if he were selling corn, his “pre-harvest sales would now stand at 50 percent of anticipated production for 2018. I have another 10 to 20 percent to price as we head into July.”
His wheat marketing plan would be: “I have concluded all my pre-harvest sales and will price the remainder at harvest. On today’s close, my average cash price is $5.23 (I have a -20 basis). At this point, having a marketing plan has added 1 percent to this year’s grain revenue.”
Welch says the biggest change in the corn market balance sheet is “the increase in old crop exports, +75 million bushels. This lowered beginning stocks for 2018/19 combined with a 25 million bushel increase in new crop use (-25 feed, + 50 fuel) to lower ending stocks by 105 million bushels.”
The report included “no changes to 2018 U.S. production.”
The report shows ending stocks projected at 1.577 billion bushels for a stocks-to-use ratio of 10.8 percent. That’s the lowest since 2013, he says. “Days of use on hand at the end of the marketing year are estimated at a 39-day supply.”
World corn supplies are down in the June report. Beginning stocks are revised lower (-2 million metric tons), and production is down 4 mmt, primarily in the Former Soviet Union countries (FSU-12). Total corn production is projected to be the second largest crop on record, and foreign production is still at an all-time high. Use is off this month by 1.3 mmt, which means ending stocks are down 4.5 mmt. “Globally, the days of use on hand estimate for corn is projected to be down to a 52-day supply by the end of the marketing year.”
The WASDE report shows U.S. wheat supplies up, result of increased carryover from last year, blamed, in part, on a decline in old crop exports. A 2018 yield increase of 1/10 bushel also adds to the increase. “But new crop ending stocks are down as the export projection for 2018/19 was raised from 925 million bushels to 950.”
Welch says a crucial aspect of the wheat report is the adjustment to world wheat production, a 4 million metric ton (147 million bushels) reduction “in the size of the wheat crop in the nations of the FSU-12. Among other major producers, EU production estimates are down 1 mmt and India is up 2 mmt. These production changes were offset by an increase in beginning stocks (+2 mmt) and a decline in use (-3 mmt), which raised ending stocks by 2 mmt and the days of use on hand at the end of the marketing year estimate from 128 to 129.”
Wheat Crop Outlook
In the Southern High Plains (Kansas, Oklahoma, Texas, and Colorado) winter wheat production for 2018 is estimated at 453 million bushels, 38 percent of the U.S. winter wheat total. That’s down from 587 million bushels last year and marks the lowest production total in Kansas and Oklahoma since 2014. The Texas wheat crop is the smallest since 2006. Colorado winter wheat production is up 1 million bushels compared to last year.
The national winter wheat yield estimate, 48.4 bushels per acre, is down 1.8 bushels from last year. This yield estimate remains the third highest on record and very near a trend line yield going back to 1986. The average yield in Kansas in 2018 is 37 bushels (-11), Oklahoma 26 (-8), Texas 27 (-2), and Colorado 40 (-3).