What does the 2016-17 marketing year hold for grains and oilseeds?

Here are my three takeaways from the United States Department of Agriculture (USDA)’s most recent World Agricultural Supply and Demand Estimates (WASDE) report.

  • A growing supply of corn may drive prices lower even as exports and feed usage expand.
  • The pace of soybean exports and crush should increase next year, stabilizing prices at a profitable level.
  • A projected fall in wheat production may not be enough to prevent prices sliding from 2015-16 levels.  

The USDA’s March 31st report on planting intentions kicked off “prognostication season” with a forecast of potential 2016-17 supply – but that’s just one side of the story. The most recent WASDE report projects both supply and demand for the 2016-17 marketing year.

The WASDE report projects corn and soybean prices at lower levels than what futures markets currently show for December corn and November soybeans. Growing concerns around weather and production shortfalls in South America trump projections around increasing supply in the U.S. market.  

The stocks-to-use ratio: an easy, powerful tool

The stocks-to-use ratio explains the balance between supply and demand: a high ratio indicates more available supply compared to demand. As such, we’d expect downward pressures on prices. A lower ratio indicates a tighter supply relative to total use; we’d expect higher prices. 

Assuming average yields and U.S. planting intentions are realized, the corn stocks-to-use ratio will jump from 13.3 to 15.2% by the 2016-17 marketing year-end. That’s the most important factor pushing down price projections for the 2016-17 marketing year.

Ultimately, you’ll use this information to create a sound marketing plan. We’ll keep an eye on the stocks-to-use ratio for major commodities throughout the year. Check back often!