(Agrimoney) – Corn futures are on track to fall for a third successive year in 2015.
That said, the decline, at 8% as of the time of writing, is far less than that suffered by the other big Chicago contracts are poised for, with soybeans down 13% so far in 2015, and wheat down 20%.
The, relative, resilience reflects a pullback in global production from the first 1.0bn plus-bushel harvest in 2014-15 to some 975m bushels in 2015-16, on US Department of Agriculture expectations.
Weaker prices reduced the incentive for farmers to maximise yield prospects, while the European Union and Ukraine crops were also hurt by undue summer heat and dryness.
Will the grain’s improved pricing, compared with the likes of arch-rival soybeans, fuel a jump in output ahead, and fresh pressure on values. Or can corn futures maintain their outperformance?
In the third of Agrimoney.com’s series of agricultural commodity outlooks for 2015, expert commentators give their views.
ABN Amro
“As things stand, we do not foresee a marked upturn in fortunes for grains and oilseeds in 2016. Prices will remain at the current, relatively low levels.
“High stock levels and sustained high output projections will keep prices under pressure, also in the coming year. But we do think the bottom will have been reached by then.
“The stocks-to-use ratio for corn is slightly lower than for wheat and soybeans, but still relatively high at around 22%.
“Output is projected to remain high at 974m tonnes in 2015-16. Whilst lower than in the past two record years, this is still 7% above the five-year average.
“The El Niño phenomenon has been a major concern for some time now. Its impact on grains and oilseeds seems limited, but the subsequent La Niña could inflict drought on the most important corn production areas in the US.
“The resulting fall in production could create upward price potential.”
Citigroup
“We think US exports could rebound modestly in the first half of 2016. Citi’s carryout estimate of 1.7bn bushels is 60m bushels below the [USDA’s].
Citigroup corn price forecasts
Q1 2016: $3.95 per bushel
Q2 2016: $4.05 per bushel
Q3 2016: $4.15 per bushel
Q4 2016: $4.00 per bushel
Forecasts for quarter average, spot New York futures contract
“We think the catalyst for higher prices in 2016 could be lack of corn acreage growth, higher risk management flows and greater weather risks.
“Our outlook reduces corn plantings in 2016-17 after the recent leg lower in prices, stabilising input costs and large inventory overhangs. Assuming flat yields year on year at 169 bushels an acre and normal abandonment rates, we project a crop of 13.56bn bushels, down 4.5% from the record 2014-15 harvest.
“Our baseline case is that the current strong El Niňo would turn ENSO-neutral by late spring. But the material supply risk would be if the cycle switched to a strong La Niňa during pollination in July.
“US maize exports should tick up as strong dollar impacts moderate and feed demand grows.
“Corn-ethanol grind seems capped for now at 5.200bn-5.225bn bushels.”
Commerzbank
“First forecasts are already being made for US acreage distribution in the 2016-17 season. Informa Economics assumes that after three years of a shrinking US corn acreage, an increase is to be expected again for 2016-17.
“The relative shift in favour of soybeans seen in recent years should thus be concluded and reversed.
“If this should occur, there ought to be no scarcity of corn in the future either. This dampens the price outlook.
“In the next season, the smaller acreage currently sown with wheat in Ukraine could lead to more corn being grown. UkrAgroConsult therefore expects production to rise in 2016-17 by 12% to 25.8m tonnes.
“In the EU itself, the harvest should then also turn out higher again. The European farmers’ association Copa-Cogeca estimates a plus of 15% and an output of a good 65m tonnes.
“Our forecast for corn in the October-to-December quarter 2016 calls for $3.80 per bushel in Chicago, and E175 per tonne in Paris.”
Goldman Sachs
“We continue to see robust 2015-16 supply keeping stock-to-use ratios elevated.
“In particular, the 44% year-to-date depreciation in the Brazilian real and more recent shift in the corn-to-soybean ratio could see both South American safrinha and US spring corn acreage increase.
“This keeps our 2015-16 [price] forecasts firmly anchored below $4.
“Separately, the recent increase in the USDA’s estimated Chinese corn stocks implies the nation holds over half of global corn inventories with a 53.5% stocks-to-use versus 11.1% average ex-China.
“China has lowered its support price for corn by 10% and restricted imports of competing feed grains, eg sorghum, DDGs, reflecting tentative signs that China intends to slow, if not reverse its stocks accumulation.”
Darrel Good, Department of Agricultural and Consumer Economics, University of Illinois
“Corn prices remain pressured by three consecutive large crops in the US and expectations of a third consecutive large coarse grain crop outside the US.
“Corn demand remains weak due to a slow increase in ethanol production, declining livestock prices, and export competition stemming from large crops outside the US and a strong US dollar.
“Planted acreage of corn is expected to increase slightly in 2016, perhaps to the level initially intended in 2015.
“A trend yield in 2016 near 167 bushels per acre would result in a crop slightly smaller than the 2015 crop and allow for some modest drawdown in year-ending stocks.
“Prices averaged $3.70 per bushel during the 2014-15 marketing year and are expected to average near $3.65 per bushel during the current year and near $3.85 per bushel during the 2016-17 marketing year.”
Morgan Stanley
“We see modest upside to corn prices, as the need to maintain acreage trumps the drag of weaker soybean and wheat fundamentals.
“Better-than-normal weather has driven 2015-16 US yield prospects to just shy of last year’s record.
“However, three straight years of acreage cuts have left US inventories on track to be about balanced in 2015-16.
“Corn prices need to hold their ground to limit the extent of stock draws and to protect acreage from further switching to soybeans in 2016-17.”
Rabobank
“In just two years, [global corn] stocks have grown 42% and pushed prices down to levels below $4 a bushel.
Rabobank corn price forecasts
Q1 2016: $3.90 per bushel
Q2 2016: $4.20 per bushel
Q3 2016: $3.95 per bushel
Q4 2016: $3.70 per bushel
Forecasts for quarter average, spot Chicago futures contract
“However, the ample global supply is forecast to dry out somewhat in the 2016-17 season. Corn prices believed to have already found their lows are expected to strengthen into 2016.
“Argentina will reduce corn acreage by more than 10% to expand soybean plantings, which will lower corn output by about 18%m to 22m tonnes. Given the decline, we expect exports out of Argentina to shrink by 4m tonnes in 2015-16.
“Relatively flat South American exports forecast for 2016-17 will keep global dependency on US corn exports high which, assuming the dollar remains strong, will lend support to Chicago corn prices.
“Global ending stocks are expected to be about unchanged by the end of 2015-16, resulting in an unchanged stocks-to-use ratio of 22%. However, excluding China from this forecast shows a more severe global stock reduction, by 13%, or 9m tonnes, as Chinese stocks are poised for additional growth.
“We see the need for a 1.5m-acre increase in US planted area in spring 2016. The expected strong demand, as well as the need for additional acres, will keep corn prices supported in the first half of 2016.”
