The U.S. Department of Agriculture decreased the U.S. corn yield in its February World Agricultural Supply and Demand Estimates report. Globally the cut in U.S. production was offset by increases in foreign production, mostly in Argentina, leaving world corn supplies virtually unchanged.
With the U.S. corn yield decreasing from 178.9 bushels per acre in the December estimate to 176.4 currently, the size of the U.S. corn crop decreased by 206 million bushels. A small decrease in imports put the total corn supply in the 2018-2019 marketing year at a decrease of 211 million bushels. But much of that was offset by decreases in domestic use for corn of 165 million bushels. Exports were left unchanged. Corn ending stocks decreased 46 million bushels to 1.735 billion. Days of use on-hand at the end of the marketing year decreased from a 43.3-day supply in December to 42.6 days. The price outlook was unchanged.
The world corn situation was little changed. Total supply increased 0.3 million metric tons or 12 million bushels. Use decreased 0.7 million metric tons or 39 million bushels. A net increase of 1 million metric tons or 39 million bushels in world ending stocks left the stocks-to-use ratio – days of use on hand at the end of the marketing year – unchanged at a 100-day supply. Removing China from the calculation, days of use on hand worldwide is a 44-day supply – the least since 2013-2014.
Corn stocks in all positions as of Dec. 1 were 11.952 billion bushels. That’s a decrease from 12.567 billion bushels the year before. While still more than the most recent five-year average, the Dec. 1, 2018, number is the least December corn-stocks level since 2015.
Outside markets influence U.S. sales
The growth of the gross domestic product in the United Kingdom decreased to 0.2 percent in fourth-quarter 2018, from 0.6 percent growth in the third quarter. For all 2018 gross domestic product growth in the UK is estimated at 1.4 percent, the least since 2012.
Cited as reasons for the slowdown in the British economy are uncertainties related with the move to withdraw from the European Union, weakness in the British pound, and spillover effects from the trade war between the United States and China. According to the U.S. Census Bureau, the UK is the fifth-leading customer for U.S. exports, accounting for about $100 billion per year – behind our neighbors in the Americas and behind China.
Weakness in the global market place and other currencies can make the U.S. dollar stronger by comparison. That can be negative for U.S. export prospects on several fronts including weaker demand. The strong dollar makes our products more expensive to foreign customers.
The seasonal price pattern for the December corn contract shows that prices tend to have some upward momentum early in the year before trading at less than the yearly average in July – index equals 0.50. The normal bottom of the market is in late September, with a modest rebound into harvest and contract expiration.
Marketing plan for 2019 begins
My marketing plan is based on spreading out sales, with timing aligned around major reports and production indicators as well as seasonal tendencies. The breakout following the release of supply and demand numbers this past week was to the downside, triggering my first sales of the 2019 crop. I priced 20 percent at 398. We have a long way to go in this crop year, with most of the market-influencing factors ahead of us. But a sale near $4 is more than the harvest-time futures price in five of the past five years. I hope the early sale is the worst I make for the 2019 crop.
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