AgResource estimates final 2016/17 US corn stocks at 2,343 Mil Bu, just 7 Mil shy of the USDA’s forecast in its Sep report, and so NASS’s quarterly stocks report next week shouldn’t find much trading interest. All that’s unknown is the Jun-Aug feed/residual, but even this data has been rather unsurprising in recent years. There’s no doubt US corn supplies are large.
However, ARC does mention that US domestic corn use has shown decent signs of growth, partially due to supplies but mostly due to ethanol production/demand. Domestic corn consumption in ‘16 is pegged at a record 12,294 Mil Bu, up 5% from last year, and up 20% from 2012. Ethanol margins remain strong, plant capacity expansion is likely and domestic corn use in the next few years look to range from 12,400-12,600 Mil Bu.
Slowly the market is working to clear excess inventories. We’ve mentioned this week that cash milling and feed wheat values are rising, thus boosting world corn trade beyond the next quarter. US corn end stocks are forecast to be down a modest 225 Mil Bu in 17/18, while world stocks will fall some 25-27 MMTs. And the question moving forward is whether a repeat of nearly perfect S American weather lies in the offing?
A bullish outlook requires adverse weather or a larger than expected cut in global corn acreage in 2018, but our work does indicate higher lows and higher highs over the next 9-12 months as the market works to secure additional Northern Hemisphere seedings next spring. The point is that world grain inventories scored an intermediate peak in 2016, and that buffer carryover stocks are falling, albeit slowly.