Milling & Baking News - November 22, 2016 - 24

Grain Market Roundtable X

million bus, which compared with 775
million bus in 2015-16 and 864 million
bus in 2014-15. Both Mr. Meyers and
Mr. Freed indicated U.S. exports may
fall a bit short of the forecast, perhaps
by as much as 25 million bus.
Mr. Freed and Mr. Meyers also
pointed to the advance in the value of
the dollar in the wake of the election of
Donald J. Trump as 45th president of
the United States as constraining wheat
export prospects in the near term. The
dollar's advance was related to the
rally in equity markets, which was attributed to the end of a contentious
U.S. general election, President-elect
Trump's suggestion a priority of the
new administration will be rebuilding

Kansas City bakers standard patent price
per cwt
$14.50
$13.50
$12.50
$11.50

Dec.
2015

Feb.
2016

April

infrastructure, which may stimulate
the economy, and ideas that the Federal Reserve will raise interest rates in
the United States, making investment

June

Aug.

Oct.

in the dollar more attractive.
The stronger dollar, though, made
U.S. commodities more expensive
to overseas buyers, which pressured

Prices resilient despite record corn crop
KANSAS CITY - Big crops get bigger is the market adage that appears
to be the case with the 2016 corn crop, which was forecast by the U.S.
Department of Agriculture on Nov. 9 at a record 15,226 million bus, up
73 million bus from the initial survey-based forecast in August and up
1,625 million bus, or 12%, from 13,601 million bus in 2015.
Despite the higher crop forecasts, CME Group corn futures have
held above multi-year lows set in late August.
"Futures prices for corn have been pretty resilient," said Paul
Meyers, vice-president, commodity analysis, Foresight Commodity
Services, Inc., Naperville, Ill. Early last week the March 2017 corn future was trading near $3.45 a bu, up 20c, or 6%, from its late August
low near $3.25 a bu.
Going forward, Mr. Meyers said he expects March corn to drop
about 10c to around $3.35 a bu. He doesn't expect a significant decline because he thinks much of the bearishness of the large crop
already was factored into the market. But he added that the strong
value of the U.S. dollar (on a notable upturn since the presidential
election) and lower crude oil prices will bring some pressure.
Support for corn futures has come mainly from strong export sales
and higher ethanol production, Mr. Meyers said, as well as from ideas
that U.S. corn plantings may fall in 2017 as current prices favor the planting of soybeans.
In its World Agricultural Supply and Demand Estimates report
on Nov. 9, the U.S.D.A. forecast total 2016-17 corn supply up 10%
from 2015-16 at a record 17,013 million bus after adding carryover of 1,738 million bus and imports of 50 million bus to 2016
production. Usage forecasts also are up from 2015-16, with feed
and residual at 5,650 million bus, up 10%, use for ethanol at 5,300
million bus, up 2%, food and seed at 1,435 million bus, up slightly,
and exports at 2,225 million bus, up 17%. Carryover on Sept. 1,
2017, was forecast at 2,403 million bus, up 38% from 1,738 million
bus in 2016 and resulting in a stocks-to-use ratio of 16.4%, the
highest since 2005-06.
The U.S.D.A. forecast the average price of corn paid to farmers in
2016-17 to range between $3 and $3.60 a bu, compared with $3.61
a bu in 2015-16, with the November forecast up 5c a bu from October "based on higher-than-expected observed early-season prices."
Corn basis levels in the country were weaker than a year ago but
still near average levels, Mr. Meyers said. With weaker futures, the
basis has had to do the work of generating sales from the country,
where farmers tend to favor storage rather than selling before the
end of the calendar year mainly for tax purposes. As futures firmed
since late August, the basis has weakened modestly. Relatively few

24 / November 22, 2016 XMilling & Baking News

transportation issues, and thus declining rail rates since October
highs, also have been supportive to basis levels in the country.
Mr. Meyers said he believes the 10% increase in the U.S.D.A.'s
2016-17 feed and residual forecast is "excessive" and the number
is about 150 million bus too high. A lower feed number would push
carryover above 2,500 million bus, he said. But he added that he
thought the U.S.D.A.'s ethanol and export forecasts were okay.
In his Nov. 14 Weekly Outlook, University of Illinois agricultural economist Todd Hubbs noted strong livestock inventory numbers that included
cattle on feed flat with a year ago, dairy cows up slightly, broiler chick
placements up 2%, egg layers up 7% (with the 2015 number down because of avian influenza) and slaughter hogs up about 2%. But he also
noted mitigating factors, including mild fall weather, increased availability of feed wheat and higher levels of distillers' dried grains due to
increased ethanol outturn but reduced D.D.G. exports to China.
"Given the large projected increase ... monitoring feed and residual use projections will be important for the marketing year ending
stocks and corn use totals," Mr. Hubbs said.
The U.S.D.A. forecast the average corn yield for 2016 at a record
175.3 bus an acre, up just 0.2 bu from its initial August forecast but
up 1.9 bus from October and up 6.9 bus, or 4%, from last year.
Some members of the trade believe the U.S.D.A.'s corn yield is too
high, but Mr. Meyers said that since the U.S.D.A. raised its corn yield
estimate in November after lowering it the prior two months indications are the high number is more likely to stick and the naysayers are
"running out of time" for it to come down with the final forecast due
in January.
Mr. Hubbs noted U.S.D.A. yield increases in November of 3 bus per
acre in Nebraska and South Dakota, 4 bus in Minnesota and 17 bus
in North Dakota (with the latter also a surprise to Mr. Meyers), accounted for 78% of the total U.S. increase of more than 168 million
bus from October.
Record large global corn supplies also have weighed on domestic
prices, Mr. Meyers said. Although U.S. corn export sales commitments
were about double the year-ago pace, increased plantings in South
America may provide more competition to U.S. exports in the months
ahead, especially since Argentina has ended its export tax on corn (but
not on soybeans). But he added that the record large corn supply and
low prices will keep U.S. corn "pretty competitive" in the export market.
For next year, Mr. Meyers said he expects fewer acres planted to
corn in the United States, but with the large supply and large carryover, "we're not going to run out of corn any time soon." MBN
- Ron Sterk

bakingbusiness.com / world-grain.com

http://www.bakingbusiness.com http://www.world-grain.com

Milling & Baking News - November 22, 2016

Table of Contents for the Digital Edition of Milling & Baking News - November 22, 2016