World Grain - October 2014 - 70

FEATURE: GRAIN MARKET ROUNDTABLE

lion bushels, up 38 million bushels from
the July projection but down 100 million
bushels, or 5%, from 2.130 billion bushels in 2013. The hike in the production
forecast lifted the forecast for the U.S.
wheat supply in 2014-15 to 2.779 million bushels, which still was down 8%
from 3.016 billion bushels in 2013-14.
The USDA raised its forecast for
feed and residual use of wheat in 201415 by 10 million bushels, to 155 million bushels. Feed usage in 2013-14
was 223 million bushels. The USDA
raised its forecast for U.S. wheat exports to 925 million bushels from 900
million bushels as the July projection
and compared with 1.176 billion bushels in 2013-14.
The U.S. carryover of wheat on June 1,
2015, was forecast at 663 million bushels, up 3 million bushels from the July
projection and up 73 million bushels, or

12%, from 590 million bushels in 2014.
Asked what the major takeaways were
from the USDA's August reports, Steve
Freed, vice-president, ADM Investor
Services, Chicago, said, "First of all, the
USDA confirmed that world wheat crops
are getting bigger, especially in Russia
and Ukraine. I also think with the larger
China crop, there will be less demand
from China. Here in the United States,
I think most people think the USDA is
overstating both feed and export demand.
The final 2015 carryover may get larger."
Paul Meyers, chief agricultural economist, Foresight Commodity Services,
said the huge increase in the world
wheat production forecast was the single most bearish feature in the report.
Meyers recalled that the USDA in May,
in its first supply-and-demand outlook
for 2014-15, forecast world wheat production at 697 million tonnes, which

would have been 17 million tonnes
smaller than the record 2013-14 crop.
Now, the world crop is forecast to be a
record and 2 million tonnes larger than
last year's crop. That 7-million-tonne
increase in forecast wheat production
from the July report projected to take
place in Russia and Ukraine, two major wheat exporters, indicated there will
be a larger exportable supply worldwide, and even as the USDA raised its
U.S. export forecast, it was clear U.S.
wheat will face significant competition in world markets. "There has been
a dramatic shift in world wheat supply
expectations for 2014-15 that has been
reflected in the market's psychology,"
Meyers observed.
CORN, SOYBEANS TO IMPACT WHEAT
Meyers said the most important market mover for wheat in the next few

Analysts expect record corn crop to get bigger
Although the U.S. Department of Agriculture forecast the 2014
U.S. corn crop record large at 14.032 billion bushels and the average yield record high at 167.4 bushels an acre, analysts expect
both numbers will increase as "big crops get bigger." The averages of pre-report trade expectations were 14.239 billion bushels
and 170 bushels an acre, respectively.
"They just look unbelievable," said Stephen Nicholson, vicepresident, food and agribusiness research and advisory at Rabo
AgriFinance, St. Louis, Missouri, U.S., after recently looking at
crops in several states across the heart of the Corn Belt. "There
was nothing in the numbers that was too startling," he said. "I
thought the USDA might be more aggressive on yield." He expects a final average yield of 174 bushels an acre, which could
add another 500 million or so bushels to the 2014 crop.
Paul Meyers, vice-president of commodity analysis, Foresight
Commodity Services, also said he wasn't surprised at the USDA
corn numbers.
"The USDA doesn't do it all at once," Meyers said, referring to
the department's initial forecasts that tend to be raised in later
reports for big crops. He noted there had been five record high
yields since 1990, with the August forecast 2 to 11 bushels an
acre below the final estimate issued in January. He expects the
final average yield to be 170 bushels an acre or higher for the
2014 crop.
"There's plenty of corn around," Meyers said, noting record
high U.S. supplies projected for 2014-15 and a record global corn
crop. "Prices will continue to work lower. The question is, how
low is low on prices."
Both analysts expressed concern about the impact of logistics,
70

especially rail in the Upper Midwest, after last winter's shipping
debacle. Nicholson noted that users will not be reaching beyond
their traditional buying areas because of the large crop. The biggest impact will be on country basis levels in "fringe" areas, with
reports of flat prices already in the $2.50 to $3-a-bushel range in
some areas. Farmers have continued to build bins and will store
as much corn as they can because of low prices this fall.
While much of the focus has been on the supply side due to
expected record production, demand is another issue. The USDA
in the Aug. 12 WASDE projected total corn use in 2014-15 at
13.435 billion bushels, up 100 million bushels from the July projection but down 165 million bushels from 2013-14. Although
projected feed use in 2014-15 at 5.250 billion bushels was up 75
million bushels from 2013-14, use of corn for ethanol at 5.075
billion bushels was down 45 million bushels and exports at 1.725
billion bushels were down 195 million bushels. With total supply
projected at 15.243 million bushels, up 107 million bushels from
July and up 462 million bushels from 2013-14, carryover on Sept.
1, 2015, was projected at 1.808 million bushels, up 7 million
bushels from July and up 627 million bushels, or 53%, from the
prior year.
Meyers said he expects a carryover near 2 billion bushels "by
the time it's all done" based on higher production partially offset
by higher ethanol use than the USDA projects.
Ethanol plants, livestock feeders and food processors "are the
winners" in this year of record corn production and lower prices,
Nicholson said.
- Ron Sterk
October 2014 / World Grain / www.World-Grain.com

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World Grain - October 2014

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