Corn Prices Plunge on Continuing Large Exportable Supplies

U.S. corn export prices, which are a proxy for global prices, have tumbled to their lowest levels in nearly 4 years, because of rising stocks and prospects for another bumper harvest. The USDA June 1 Grain Stocks report showed higher-than-expected U.S. stocks, boosting exportable supplies. Meanwhile, the 2014/15 crop is projected only slightly below last year’s record with favorable growing conditions continuing to support the outlook for a record yield.

Over the past decade, high prices stimulated expanded production not only in the United States, but also in Argentina, Brazil, and Ukraine. Furthermore, in an unusual situation, exporters’ supplies will all be available to the market at the same time this fall. Shipments from a delayed harvest in Argentina will coincide with shipments from Brazil’s near-record second crop and intensify competition with U.S. and Ukrainian new-crop supplies.

WHEAT: WORLD MARKETS AND TRADE

OVERVIEW

Global production for 2014/15 is up but still below last year’s record. Higher production in Australia, EU, Ukraine, and the United States more than offsets smaller crops in Canada and Kazakhstan. Global trade is down marginally. U.S. and Kazakh exports are cut and mostly offset by increases for Australia and Ukraine. Large supplies are expected in major exporting countries, pressuring prices. The season-average farm price is projected lower, also reflecting declining prices for other grains. For 2013/14, U.S. exports are raised slightly.

PRICES:

Domestic: Prices of most wheat classes eased over the past month. Abundant global supplies of both wheat and corn continue to pressure prices. Hard Red Winter (HRW) dropped $9/ton to $313, while Soft Red Winter (SRW) declined $7/ton to $245. Soft White Wheat (SWW) fell $13/ton to $271 and Hard Red Spring (HRS) was unchanged at $325/ton.

TRADE CHANGES IN 2014/15

Selected Exporters

• Australia is raised 500,000 tons to 19.5 million with higher production prospects.

• Kazakhstan is slashed 1.0 million tons to 6.0 million on reduced crop prospects.

• Ukraine is boosted 500,000 tons to 9.0 million with a larger crop.

• The United States is lowered 500,000 tons to 25.0 million as a result of tight Hard Red Winter supplies and strong competition from other major exporting countries.

Selected Importers

• European Union is lowered 500,000 tons to 5.0 million on higher production and ample supplies of domestic feed-quality wheat.

TRADE CHANGES IN 2013/14

Selected Exporters - based on trade data

• Canada is up 500,000 tons to 22.0 million.

• European Union is boosted 500,000 tons to 30.5 million.

• Kazakhstan is 300,000 tons higher at 8.3 million.

• The United States is raised 300,000 tons to 31.5 million.

Selected Importers - based on trade data

• Morocco is up 300,000 tons to 3.9 million.

• Sudan is raised 400,000 tons to 2.5 million.

RICE: WORLD MARKETS AND TRADE

OVERVIEW

Global production and stocks in 2014/15 are down somewhat from last month due to reductions in India. U.S. supplies, on the other hand, are up significantly on greater area, driving exports, consumption, and stocks higher. U.S. medium and long-grain prices are down.

PRICES

After peaking in May, the gap between quotes for U.S. #2/4 and Thai 100B is beginning to narrow. At $570 per ton, quotes for U.S. #2/4 are the lowest in 2 years and could drop further in the coming months as the long-grain crop is projected to be the largest in 4 years. By contrast, quotes for Thai 100B, at $415 per ton, have come up slightly in recent weeks as sales are largely on hold while the military government inspects stocks. Interestingly, the last time that U.S. quotes were at the current level, they were below Thai 100B.

SELECTED TRADE CHANGES

• Brazil’s exports are raised 100,000 tons in 2014 to 950,000 on the pace of shipments.

• United States’ exports are up 50,000 tons to 3.2 million in 2014 and up 250,000 tons to 3.5 million in 2015 on a larger crop.

• Philippines’ imports are cut 550,000 tons in 2014 and 200,000 tons in 2015 to 1.5 million and 1.6 million, respectively, on delayed arrivals and government investigations into undocumented trade.

• Vietnam’s imports are up 100,000 tons in 2014 and 2015 to 300,000 and 400,000, respectively, due to normal stocking patterns.

• For 2013, Pakistan’s exports are raised 526,000 tons to a record 4.1 million while Egypt’s exports are cut 150,000 tons to 700,000, and Madagascar’s imports are up 110,000 tons to 460,000, all based on trade data.

COARSE GRAINS: WORLD MARKETS AND TRADE

OVERVIEW

World corn production in 2014/15 is mostly unchanged with a larger forecast crop in China more than offset by reduced crop prospects in the United States and Canada. However, global ending stocks are forecast at the highest level in 15 years with greater carryin stocks in Brazil and the United States. Global trade is slightly lower. U.S. exports are unchanged, but the season-average farm price is lowered due to greater supplies and reduced feed and residual use.

For 2013/14, global trade is slightly higher as stronger demand from the EU and South Korea more than offsets weaker demand from China. U.S. exports are unchanged; the season-average farm price is lowered slightly on declining cash and futures prices.

PRICES

Corn prices at all origins dropped since the release of the June WASDE report. U.S. quotes fell $14/ton to $197/ton on prospects for another bumper crop, favorable growing conditions, and larger supplies as indicated by the June 1 Grain Stocks report. Argentina and Brazil shed $8/ton and $10/ton, respectively, but are now only slightly lower than the United States. Black Sea quotes plummeted $42/ton to $197/ton with projections for abundant supplies available from competitor countries.

TRADE CHANGES IN 2014/15

Selected Exporters

• Canadian corn is cut 500,000 tons to 1.0 million because of sharply reduced crop prospects.

• Serbian corn is boosted 200,000 tons to 2.3 million on improved crop prospects.

• Canadian barley is slashed 400,000 tons to 800,000, the lowest in over a decade, on reduced plantings and tight domestic supplies. (Exports for 2013/14 are lowered 200,000 tons to 1.6 million).

• Ukrainian barley is up 200,000 tons to 2.2 million on larger exportable supplies. (Exports for 2013/14 are cut 200,000 tons to 2.1 million.)

• Argentine sorghum is down 200,000 tons to 1.8 million because of greater expected supplies from the United States.

• Australian sorghum is lowered 200,000 tons to 800,000 because of strong domestic feed demand. (Exports for 2013/14 are cut 300,000 tons to 400,000).

• U.S. sorghum is raised 500,000 tons to 4.5 million because of greater exportable supplies and strong demand from China. (Exports for 2013/14 are up 300,000 tons to 5.0 million.)

Selected Importers

• Chinese sorghum is up 200,000 tons to 3.9 million because of strong demand for imported feedstuffs.

TRADE CHANGES IN 2013/14

Selected Exporters

• Russian corn is raised 200,000 tons (to 4.0 million); barley is boosted 400,000 tons (to 2.7 million), both on the pace of shipments.

• Argentine barley is lowered by 300,000 tons to 2.7 million on the near-absence of new sales; Australian barley is up 300,000 tons (to 6.0 million) because of strong demand from China.

Selected Importers

• Chinese corn is cut 500,000 tons to 3.5 million due to continuing cancellations of U.S. sales, slow trade in recent months, and greater domestic supplies. (Barley is boosted 500,000 tons to 3.8 million because of a surge in trade with Australia.)

• EU corn is up 500,000 tons to a multi-decade high of 14.5 million based on license and shipment data, although the pace is expected to ease in coming weeks. (Exports are boosted 200,000 tons to 2.2 million.)

• South Korean corn is raised 500,000 tons to a record 10.0 million based on the strong pace of shipments, despite overall sluggish meat production.

• Saudi barley is cut 500,000 tons to 7.5 million because of slowing trade in recent months and ample stocks