Corn stocks rebuild, even as USDA projects smaller-than-expected supply, carryout

Jan. 20—Corn values shot higher following the USDA January supply/demand projections. Traders expected a more bearish outlook, and were surprised at the smaller supply and carryout. USDA projected corn production at 13.925 billion bushels, lowering yields by 1.6 bushels from the previous month for a final yield of 158.8 bushels per acre. The market was expecting 160 bushels per acre, topping 160 for the third time in the past 10 years. Dec. 1 corn stocks totaled 10.4 billion bushels, well above last year. September to November disappearance was greater than expected, implying more corn usage. USDA increased projected feed use to 5.30 billion bushels, compared to 4.335 billion bushels last year. Ethanol demand is expected to increase by 50 million bushels this marketing year for a total of 5 billion. With higher feed demand and more coproduct supply, distillers grains exports and animals on feed will likely increase. 

The total U.S. corn supply is pegged at 14.781 billion bushels and demand at 13.150 billion bushels, creating ending stocks of 1.631 billion. The 12.4 percent carryout-to-use ratio is a very comfortable level that will limit upside movement in corn. The bars in the illustration depict carryout and the stocks-to-use ratio, illustrating the recovery in stocks which has led to lower prices and generated further demand domestically and globally. It will also lead to fewer planted acres this next spring as producers weigh other commodity returns, however.