Second guessing USDA projections for corn
Based on current USDA projections of consumption, 2013-14 marketing year ending stocks are projected at 1.146 billion bushels, 185 million bushels less than last month's projection and 741 million less than the November 2013 projection. Actual year ending stocks will be estimated with the USDA's release of the September 1 stocks estimate on September 30. Even if the current USDA projection of exports is correct, year-ending stocks could differ from both the current and subsequent projections since the magnitude of feed and residual use will remain partially unknown until the release of the September stocks estimate. That stocks estimate in the previous 10 years, for example, has differed from the WASDE September forecast of ending stocks by as little as four million bushels (2004) and as much as 320 million bushels (2010).
For 2014, the USDA projected yield based on a weather-adjusted trend model that assumes normal mid-May planting progress and normal summer weather is a record 165.3 bushels per acre. Based on corn planting intentions revealed in the March Prospective Plantings report, the 2014 crop is projected to be 10 million bushels larger than the record crop of 13.925 billion bushels produced in 2013. Exports during the 2014-15 marketing year are expected to be 200 million bushels less than the projection for the current year, while feed and residual use is expected to drop by 50 million bushels. These production and consumption projections point to stocks at the end of the 2014-15 marketing year of 1.726 billion bushels, generally exceeding expectations. The marketing year average price is projected in a range of $3.85 to $4.55 per bushel, down from $4.50 to $4.80 expected this year.
Although other factors may have contributed, corn prices declined following the release of the new projections. Given the surprisingly large level of consumption of U.S corn that has unfolded this year and planting season weather that may pose a threat to both planted acreage and yield in some areas, the price weakness appears to be premature.