When you look at the World Agricultural Supply and Demand Estimates report from the USDA, you may get a bullish feeling for corn. However, this is not the case. Corn prices are struggling greatly. Though it may be easy to place blame on trade disputes, there is much more to it. But with such bullish world estimates, why are corn prices still so low?
Bullish Report May Be Misleading
Recently, the USDA released their WASDE report. The result looked to be bullish for corn.
USDA lowered its estimate of world ending corn stocks to 151.96 million metric tons (mmt) (5.98 billion bushels) for 2018-19, a 21% drop the previous season’s 191.73 mmt (7.55 bb) Not only are world corn stocks expected to be lower in 2018-19 relative to use, corn is expected to have the lowest stocks-to-use ratio since 1995-96, one of the more bullish years in corn price history.
Logically, this would lead many to believe corn prices would be on the rise. However, when looking at actual corn prices themselves this is not the case. In fact, the chart is in a deep slump. Currently, corn prices are down 17% from the high it reached weeks ago. The question then remains, why are corn prices so low?
Low Prices
Market prices are now near the lows of they year. The problem is prices could stay this way until changes are made on either the export or production lineups. The further into the year we get, it is becoming less and less likely 2018 crops will be a failure. Additionally, the possibility of threats to the crops are dwindling.
Given the recent trade conflicts with China, and the impact it has had on other commodities, it is easy to blame low corn prices on these disputes. However, this is not the only issue. In fact, if you hadn’t seen the USDA’s world estimates report you may not even question why prices are low.
Early planting in the U.S. went extremely well and early crop conditions looked good. Furthermore, the USDA repeatedly reported high crop ratings each Monday. This creates a recipe for even lower corn prices.
We have mostly adequate, or even better, soil moisture in many areas. As of now, it doesn’t look as though there is threat for extended periods of hot temperatures. Despite late planting, crops are seven to 10 days ahead of normal. This severely decreases the possibility of frost damage.
Couple these things with the bearish concerns in grain due to lack of a NAFTA agreement and the trade war with China, and it is no surprise prices are low.
Summary
USDA recently released their WASDE report. The low estimate in world corn supply may lead many to believe corn will be bullish in the upcoming months. However, this is not the case. Aside from this report, there are no indications of corn prices rising anytime soon. The USDA continues to put out high crop ratings and anticipates average to high yields this year. Couple good weather with recent trade conflicts and the recipe for low corn prices looks to stick.
Image courtesy of ohiofarmer.com
