Prospects for corn consumption
In the July WASDE report, the USDA forecast 2014-15 marketing year corn exports at 1.7 billion bushels. The expected year-over-year decline reflects a projected decline in world corn trade and a loss of market share to Argentina. As of July 31, the USDA reported that 305 million bushels of corn had been sold for export during the upcoming marketing year, about 60 million bushels less than sales of a year earlier. Sales to Japan and Mexico exceed those of a year ago, but sales to China are down sharply. Corn exports are difficult to anticipate as they will be influenced by the size of crops in a number of areas (some of which are not yet even planted) and the volatile world political environment. Some production issues in China, the much lower price of corn, and the competitive price of corn relative to other grains are all positive for U.S. export prospects.
Feed and residual use of corn is also difficult to anticipate, largely due to the apparent variation in the "residual" component of use. Residual use is thought to be positively correlated with crop size so a large crop this year would point to another year of large residual use. Feed use of corn is obviously influenced by livestock and livestock product production and the unknown variation in feeding rates per animal. The USDA has projected a one percent increase in the number of grain consuming animal units during the 2014-15 marketing year. In addition, corn feeding rates should be supported by lower feed prices, low corn prices relative to other feed ingredients, and positive profit margins for all the livestock sectors. Weekly, monthly, and quarterly USDA livestock and grain stocks reports will be followed closely to judge potential feed use of corn. Some small expansion in dairy cattle numbers is occurring, but broiler placements are running near the level of a year ago. A decline in the reported cases of PED virus along with the continuation of heavier slaughter weights may support corn feeding in the pork sector. The number of cattle being fed, however, will remain below the level of the previous year for an extended time. A modest increase in feed and residual use should be expected during the year ahead.
The typical corn price pattern in a large crop year is for cash prices to reach a low near harvest and then to increase modestly as the marketing year progresses. Such a pattern is dependent on corn consumption increasing in response to low prices. Early indications are for such a pattern to unfold this year.
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