USDA estimates there may be a smaller stock of corn available than originally thought. In its most recent Quarterly Grain Stocks report released Sept. 30, the department estimated corn stocks are down 10 percent from the same time last year.
The new data caused CME corn markets to shoot up. Corn futures immediately jumped 9 cents after the report’s release, with the December contract closing 14.5 cents higher to $3.79. Before WLJ press time the morning of Oct. 8, the December contract was sitting at $3.90. The March 2021 contract was at $3.97.
The elevated grain prices have added uncertainty to the livestock futures complex.
“Moderate to strong export sales to China, Hong Kong and South Korea last week created some good news from a beef demand perspective, but this is unable to totally offset the bearish short-term fundamentals seen in the market based on higher production costs,” remarked Rick Kment, DTN analyst Oct. 8.
Cash cattle markets have generally been slow. “The limited trade seen Wednesday at $108 live and $169 dressed remains a target, but the current pressure in futures prices will quickly limit packer bids from improving in the near future,” Kment said.
Feeder cattle futures have been steady to $1 lower with the continued support in corn prices continuing to add weakness to the complex.
“The increased cost to feed cattle over the next several months continues to be a major focus on nearby and deferred contracts, adding potential losses to the complex as grain traders try to assess Friday’s WASDE report,” Kment reported.
Old crop corn stocks on Sept. 1 totaled 2 billion bushels, down 10 percent from September 2019. Of the total stocks, 751 million bushels are stored on farms, down 8 percent from a year ago. Off-farm stocks total 1.24 billion bushels and are down 12 percent. The June-August 2020 period indicated disappearance is 3.02 billion bushels, compared with 2.98 billion bushels during the same time in 2019.
Based on a USDA analysis of end-of-marketing year stock estimates, disappearance data for exports, and farm program administrative data, the 2019 corn for grain production is revised up 2.67 million bushels from the previous estimate.
Corn silage production is revised up 715,000 tons. Planted area is revised to 89.7 million acres, and area harvested for grain is revised to 81.3 million acres. Area harvested for silage is revised to 6.62 million acres.
The 2019 grain yield is up 0.1 bushel from the previous estimate, at 167.5 bushels per acre. The 2019 silage yield, at 20.2 tons per acre, remains unchanged from the previous estimate.
Global use of corn is expected to be larger than the May assessment by USDA’s Foreign Agricultural Service (FAS), due to higher feed and residual use for Brazil, China, the European Union (EU) and Russia, and significantly lower U.S. corn production.
Strong meat exports in Brazil are expected to boost corn use. China’s 2020-2021 feed and residual use for all coarse grains are estimated to increase 3.2 percent compared to last year, due to an expected recovery of swine production and expansion in the poultry and ruminant sectors. Higher corn use is expected by the EU amid tighter supplies of feed-quality wheat. Russia’s domestic market calls for increased supplies.
Increased global demand for competitively priced feedstuffs and the U.S.’s decreased corn production is likely to drive prices to be even more competitive. — Anna Miller, WLJ editor