March 7, 2016
Corn, soybean, and wheat prices have been negatively impacted the past year, due in large part to increasing domestic and world stocks of these commodities. From the end of February, 2015 to the end of February, 2016, corn prices fell 8.1%, soybeans decreased 17.2%, and wheat was 14.0% lower. U.S. corn stocks are showing the smallest supply increases of the three commodities with domestic ending stocks projected to be up 106 million bu. at the end of the 2015/16 marketing year compared to last year, while soybean stocks are projected to be up 259 million bu., and wheat stocks 214 million bu. higher. World ending stocks of both corn and soybeans are projected to rise modestly this year compared to last, while world wheat stocks are expected to rise significantly to a record high level.
The huge stockpiles of wheat around the world are pressuring not only prices of wheat, but also corn as more wheat is fed to livestock. Export prices for wheat have fallen sharply since the beginning of the year as countries attempt to rid themselves of excess supplies. French milling quality export wheat for example, is currently discounted to price levels near U.S. corn export offers. This year, the two largest exporting regions in the world are the European Union countries and the nations comprising the former Soviet Union (Black Sea Region). These regions have discounted their wheat to the detriment of U.S. wheat exports which are projected to be at a 44 year low. Low priced wheat exports are also partially responsible for a decrease in U.S. corn exports which are projected to fall by more than 200 million bu. from last year's level.
The USDA at its annual Agricultural Outlook Forum projected average farm prices for the coming marketing year to fall 15 cents/bu. for corn and 30 cents/bu. for soybeans compared to this year, while wheat prices were projected to fall 80 cents/bu. Although harvested acres of U.S. wheat in the coming marketing year are expected to be 3.7 million acres less than this year, yield is projected to be about 5% higher than last summer's crop. The increased yield estimate looks reasonable as current wheat ratings are better than a year-ago due to improved soil moisture levels in the wheat belt. It appears likely that wheat will continue to be a drag on the corn market as we move into the spring months.
Hugh Whalen is a Commodity Risk Consultant at MID-CO COMMODITIES, INC. He can be reached at firstname.lastname@example.org.