BURLEY, Idaho — Large world stocks of corn and wheat are keeping futures markets bearish, as grain producers face a third year of managed money funds taking heavily short positions.
That means there’s no offsetting side in long positions to drive prices higher, Kelly Olson, administrator of the Idaho Barley Commission, said during the University of Idaho Ag Outlook seminar.
There are big supplies of wheat and corn around the world. High prices in 2012 and 2013 fueled world production. Favorable conditions produced big crops and rebuilt stocks, she said.
“Global grain stocks are coming down a little but are still quite burdensome,” she said.
The global stocks-to-use ratio in the latest World Agricultural Supply and Demand Estimates is 19 percent on corn and 36 percent on wheat.
The ratio indicates the level of carryover stock for a commodity as a percentage of the total demand or use.
Most of the burdensome grain stocks are on the wheat side of the equation, with world ending stocks for wheat 5 percent higher than a year ago. That’s despite a slight decline in world production and no change in usage.
In the U.S., wheat production was down 25 percent and ending stocks are down 21 percent. But that hasn’t raised prices because world stocks are still large, she said.
The U.S. exports 47 percent of domestic wheat production, and there’s a lot of cheaper wheat produced in the Black Sea Region. In addition, a strong U.S. dollar continues to hammer grain exports and is particularly bad for wheat, which is so dependent on exports, she said.
Global corn and wheat stocks wouldn’t look excessive if not for China. The country holds 39 percent of global ending corn stocks and 48 percent of global ending wheat stocks.
China uses the wheat for domestic food and corn for domestic livestock, and those stocks aren’t going out on the world market. In addition, a lot of the corn stocks are old and not good quality for feed and the country is trying to bring ethanol plants on line, she said.
Nonetheless, stocks are big and the price outlook for 2018 is “not great,” she said.
USDA is forecasting the 2018 corn price at $3.20 a bushel, down 5 percent year over year. The agency is expecting the all-wheat price to increase 18 percent to $4.60 a bushel. But the all-wheat price dropped 20 percent in 2016, so prices aren’t going to be back where they were two years ago, she said.
“This market is going to continue to trade sideways. There’s no big upside, but there’s some,” she said.
Australia could have a tighter wheat crop, with estimates of a 30 percent to 40 percent drop from last year’s record crop. The condition of Argentina’s wheat crop also remains to be seen, she said.
The corn picture could also change depending on the crops in Brazil and Argentina, how much is used in the U.S. for ethanol and how much China imports, she said.
Idaho is a net corn importer, but wheat prices are heavily influenced by corn and influence malt barley contracts. Higher wheat prices will lead to more malt barley contracts. Lower corn prices are going to shift livestock feeding from wheat to corn and put downward pressure on wheat prices, she said.