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Grain Market Outlook

Analysis of the June 30th USDA Grain Stocks Report

July 1, 2015

On June 30, 2015 the USDA National Agricultural Statistics Service (NASS) released its 2015 Acreage Report and its June 1st Quarterly Stocks Report.  A “Quick Analysis” of the numbers associated with these reports can be found at the Kansas State University www.AgManager.info website at the following web address:

http://www.agmanager.info/marketing/outlook/newletters/default.asp

Following are the key findings and market implications in the June 1st Grain Stocks report by major crop.  Analysis of the 2015 Acreage report will follow on the KSU www.AgManager.info website by July 2nd of this week.

A. U.S. Corn

U.S. Corn Stocks on June 1, 2015 = 4.447 billion bushels (bb)……..Down 108 million bushels (mb) from pre-report expectations, and up markedly from 3.8520 bb on 6/1/2014, 2.766 bb on 6/1/2013, and 3.148 bb on 6/1/2012. The 67% confidence interval for this USDA forecast is from 4.327 to 4.567 bb, implying that his estimate could still be adjusted in future USDA Quarterly Grain Stocks reports.

U.S. Corn Usage during March-May 2015  = 3.303 bb……..Up 113 mb from implied pre-report expectations, and greater than 3.165 bb in Mar-May 2014, 2.674 bb in Mar-May 2013, and 2.886 bb in Mar-May 2012.

On-Farm Storage of U.S. corn is estimated to be 2.275 bb, up 22% from a year earlier, and indicative of a large amount of unsold U.S. corn yet on “current crop” 2014/15.  These carryover supplies are likely to continue to be a limiting factor for U.S. corn cash prices in coming months (absent a weather-related, negative set of production factors in the summer of 2015).  

Off-Farm Commercial Storage of U.S. corn is estimated to be 2.172 bb, up 9% from a year earlier, also indicative of large available yet-unused U.S. corn supplies and of limited prospects for U.S. corn prices this summer (again – absent major crop production reductions from wet soils, slow crop development, other other potential crop problems).

Market Implications => Lower than expected June 1, 2015 U.S. corn stocks and higher than expected March-May 2015 U.S. corn use are positive factors for U.S. corn price prospects. Still, U.S. corn stocks of 4..447 bb on June 1, 2015 are 15% – 60% larger than June 1 stocks over the 2012-2014 period, and likely to be a limiting factor in major corn price rallies (absent major U.S. corn production problems in the summer of 2015).

B. U.S. Grain Sorghum

U.S. Grain Sorghum Stocks on June 1, 2015 = 33 million bushels (mb)……..Down 6 mb from pre-report expectations, and down dramatically from 99 mb on 6/1/2014, 41 mb on 6/1/2013, and 59 mb on 6/1/2012.  The 67% confidence interval for this USDA forecast is from 28 to 39 mb, implying as for other major U.S. crops that his estimate could still change to some degree in future Quarterly Grain Stocks reports.

U.S. Grain Sorghum Usage during March-May 2015  = 86.7 mb……..Up 6 mb from implied pre-report expectations, and up from 83 mb in Mar-May 2014 (also a strong export period for U.S. grain sorghum), 50 mb in Mar-May 2013, and 49 mb in Mar-May 2012.

Market Implications => Strong exports of U.S. grain sorghum during the first three quarters of the 2014/2015 marketing year (i.e., September 2014 through May 2015) have been a major factor in usage being higher than during the previous three (3) March-May periods. This is a supportive, bullish result for U.S. grain sorghum markets and local grain sorghum basis.

C. U.S. Wheat

U.S. Wheat Stocks on June 1, 2015 =753 million bushels (mb)……..up 35 mb from pre-report expectations, and up from 590 mb on 6/1/2014, 718 mb on 6/1/2013, and 743 mb on 6/1/2012.  The 67% confidence interval for this USDA forecast is from 715 to 790 mb, indicating that this estimate could still be adjusted in future Quarterly Grain Stocks reports.

U.S. Wheat Usage during March-May 2015  = 388 mb……..Down 18 mb from implied pre-report expectations, and down from 513 mb in Mar-May 2014, 547 mb in Mar-May 2013, and 486 mb in Mar-May 2012.

Market Implications => Weak exports of U.S. wheat during both the Dec-Feb and Mar-May 2015 periods and moderate wheat feeding have been major factors in U.S. wheat usage being less than during the previous three (3) March-May periods. This is a negative, bearish result for U.S. wheat market prices. 

However, concerns about the quantity and quality of the 2015 U.S. winter wheat crop and also about 2015 wheat production in major foreign wheat producing nations may mitigate these negative factors to some degree, and begin to play an important positive role in U.S. wheat market direction in coming weeks and months.

D. U.S. Soybeans

U.S. Soybean Stocks on June 1, 2015 =625 million bushels (mb)……..Down 45 mb from pre-report expectations, and up sharply from 405 mb on 6/1/2014, and from 435 mb on 6/1/2013, but down from 668 mb on 6/1/2012.  The 67% confidence interval for this USDA forecast is from 604 to 647 mb.

U.S. Soybean Usage during March-May 2015  = 701 mb……..Up 37 mb from implied pre-report expectations, and up from 607 mb in Mar-May 2014, and 571 mb in Mar-May 2013, but down from 712 mb in Mar-May 2012.

On-Farm Storage of U.S. soybeans is estimated to be 246 mb, up 126% from a year earlier, and indicative of a large amount of unsold U.S. soybeans yet on “current crop” 2014/15 – that (similar to corn markets) is likely to be a negative factor in U.S. soybean cash prices in coming months (absent a weather-related, negative set of U.S. soybean production factors in the summer of 2015).  

Off-Farm Commercial Storage of U.S. soybeans is estimated to be 379 mb, up 28% from a year earlier, also indicative along with On-farm storage amounts of a “large supply-lower price” outlook for U.S. soybean prices this summer (absent 2015 U.S. soybean crop production problems this summer).

Market Implications => At face value, this grain stocks report is “moderately supportive” for U.S. soybean markets, with lower than expected June 1st U.S. soybean stocks, and moderately higher than expected Mar-May 2015 usage.  These results support the idea that lower prices have helped cause higher soybean usage during Mar-May 2015.

Dan O'Brien
Extension Grain Economist
Department of Agricultural Economics
Kansas State University
dobrien@ksu.edu
 
Department of Agricultural Economics   K-State Research & Extension   College of Agriculture   Kansas State University