ALTHOUGH the outlook for 2014/15 suggests a further rebuilding of global stocks and a further moderation of crop prices, global demand is expected to remain strong which will continue to keep pressure on supplies, according to Joe Glauber, USDA's chief economist, speaking at the Department’s 2014 Agricultural Outlook Forum held this week.
Despite the rebuilding that has happened over the past year, he said current stocks remain tight which means prices will continue to be vulnerable to supply shocks.
U.S. corn ending stocks for 2014/15 are projected at 2.11 million bushels, up 43% from the 2013/14 forecast. U.S. soybean ending stocks for 2014/15 are projected at 285 million bushels, the highest since 2006/07 and almost double the level projected for 2013/14. Despite a 4% increase in total use of soybeans, the ending stocks-to-use ratio of 8.3% would be the highest in the past 8 years.
Arlan Suderman, senior market analyst for Water Street Solutions, said that markets are more comfortable with tighter global stocks, but pointed out that this also means prices react more aggressively when there is a problem.
The U.S. Department of Agriculture also projected that U.S. planted area for the eight major row crops will decline only slightly in 2014. Total plantings of corn, wheat and soybeans are projected to be 227.0 million acres, a decline of 1.1 million acres, mostly reflecting a decline in Soft Red Winter wheat seedings last fall.
USDA projected that U.S. farmers will plant 171.5 million acres of corn and soybean, about 400,000 less than in 2013. Stronger soybean prices relative to corn should favor soybean plantings this year. The soybean to corn futures price ratio for fall 2014 delivery has been at 2.5, which favors soybeans.
"We project that corn area will fall to 92 million acres, a decline of 3.4 million acres from 2013 levels," said Glauber. "Soybean acreage is projected at 79.5 million acres, up 3 million from 2013. Smaller SRW wheat plantings and lower soybean prices will likely reduce soybean double cropping in 2014."
Glauber said that with another sizable harvest, prices for most row crops are expected to fall to the lowest levels since 2009/10. A return to normal yields for spring-planted crops could see soybeans and corn set new production records which will result in significant stock building and ultimately, lower crop prices.Corn prices are projected to fall to $3.90 per bushel, a decline of $0.60 per bushel and the lowest season average price for corn since 2009/10. Soybeans prices are forecast at $9.65, per bushel, also the lowest season average price since 2009/10.