The recent January Crop Production Report from USDA surprised almost everyone in the commodity markets with unexpected increases in acreage and yield, especially for corn. The huge corn crop led to higher ending stocks numbers, which were at 2.02 billion bushels and are now close to 2.23 billion after the report. Joe Janzen, an agricultural economist with the University of Illinois, said the stocks-to-use ratio of 13.6, combined with all that new corn, doesn’t bode well going into the end of the marketing year
“Right, it just means this market is pretty amply supplied. All the data that we got kind of points in the same direction. We did get a December 1st grain stocks estimate as well that showed, as of December 1st, sort of immediately after harvest, we had about 13.28 billion bushels of corn in storage. That compares to about 12 billion bushels a year ago and about a billion bushels more sitting on-farm relative to a year ago. So, all of that kind of, again pointing to an amply supplied market and a corn price that to ration that has to be down in this, where we’re at, in this kind of low $4s on the board.”
Janzen said the numbers released in January generally set the tone until the Prospective Plantings Report that comes out at the end of March. He said the surprising numbers from the Crop Production Report are having a big impact on the markets.
“I think the impact is pretty significant. I think this kind of, in a sense, perhaps puts a ceiling on any potential price rally that we might have seen now. To generate such a rally, we’d probably need some production issues in South America, because that’s sort of the big kind of outstanding wildcard in the next couple of months. But this kind of, again, puts a damper on all of that, just because of the well-supplied nature of the global marketplace today.”