ARC estimates Dec 1 corn stocks at 12,440 Mil Bu, up 54 Mil (0.5%) from last year and the largest on record. Diminished Sep-Nov export shipments has been felt by the interior cash market (basis is still record weak in some locations), and while forward exports sales have improved rather quickly, there’s certainly no shortage of corn at present. Quarterly feed/residual use is pegged at 2,350 Mil Bu, which is largely in line with the USDA’s annual forecast, and in years of abundance surprises in feed/resid are uncommon.
ARC has discussed in recent research wires that the loss of export demand has at least been partially offset by record domestic use. Sep-Nov industrial disappearance is estimated at a record 1,745 Mil Bu, and combined higher with feed consumption total quarterly domestic disappearance is pegged at 4,095 Mil Bu, up 129 Mil Bu.
Total US corn disappearance in the Sep-Nov quarter is calculated at 4,445 Mil Bu, which also is perfectly aligned with the USDA’s forecast. 4,445 Mil Bu accounts for 31% of the USDA’s annual forecast, right at the 10-year average, and so the point is that NASS’s stocks report in Jan is unlikely to trigger any meaningful changes to the US corn balance sheet as a whole. More important will be whether US exports are sustained into summer amid late plantings in South America, and whether US ethanol exports continue beyond March.
The finding of record domestic corn use is important, and quarterly stocks/use at 280% is high, but not even close to the record. Our work suggests that Dec 1 US corn stocks at 12,400-12,550 Mil Bu is market neutral, and as evidenced in the graphic below suggests the long-established range will simply — continue. The correlation between Dec 1 stocks and Jan-Mar futures price action isn’t overly strong, due of course to the rising importance of S American weather, and barring major surprises in NASS’s report, fair value is put at $3.40-3.90 into March expiration. This also suggests downside risk is limited until trend/ above trend yield is confirmed in South America (Argentina in particular). Recall Brazil’s new crop export program won’t begin until Aug/September.