Welch on Grain: USDA Moves Corn Production, Stocks Down

    Market Situation

    WASDE. Production and grain stocks numbers for corn came in Monday about as expected. USDA left U.S. harvested acres alone but cut the yield estimate back to 171 bushels per acre reducing production 191 million bushels from the December estimate. This combined with a 100 million bushel decrease in feed use and 25 million bushel increase in fuel use lowered ending stocks from 1.998 billion bushels last month to 1.877 billion. The stocks to use ratio declined from 14.62% in December to 13.81%, the highest since 2008/2009.

    World corn numbers in the World Agricultural Supply and Demand Estimates showed a smaller supply of about 4 mmt and a 1 mmt ton reduction in use. This left world ending stocks down 3 mmt and the days of use on hand at the end of the marketing year at a 71 day supply down from 72 in December.

    Grain Stocks. At 11.203 billion bushels, U.S. corn stocks on December 1 are 7% above a year ago and 14% above the 5 year average. A larger than expected level of corn in storage was cited by USDA as the reasoning for lowering its feed use estimate in the current marketing year.

    Outside Markets. The December employment report from the Bureau of Labor Statistics showed the U.S. economy added 252,000 new non-farm jobs, dropping the unemployment rate from 5.8% to 5.6%. CNN reports that job growth in 2014 was 2.95 million, the highest increase since 1999 (here).

    The broader unemployment rate, U6 that includes persons working part time for economic reasons, also declined in December from 11.4% to 11.2%. The difference between the civilian unemployment rate, U3, and U6 held steady at a post-recession low of 5.6%.

    Marketing Strategies

    2015 Corn Marketing Plan. By recent standards, trading on the day of the January Crop Report this year was relatively calm. The December contract closed up or down the limit on this day in the early days of the biofuel era (since 2007) and averaged a move of 14 cents since 2011. Monday’s 4½ cent gain was small by comparison, but those gains were erased today. The average amount the closing price of the December contract varies from the price on the day of the January crop report over the last 8 years is 6 cents; 2 years up $1.50 and 2 down $1.50.

    My marketing plan calls for pricing the first portion of the 2015 crop this winter. I got a sell signal on January 7th using moving averages:

    closing price<the 4-day average<the 9-day<18-day.

    My next sales objective will be in the late winter to early spring time frame based on old crop grain use, planting intentions, and the early season weather outlook.

    Upcoming Reports/Events.

    January 21- March 3 – Master Marketer, Amarillo
    January 23 – Cattle on Feed
    February 10 – WASDE
    February 19-20 – USDA Agricultural Outlook Forum

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