A new report on the future of the US grain industry says it must increase exports to workdown stocks and improve the prospect of higher prices.
The Rabobank corn baseline outlook has changed little from a year ago, however, with relatively flat demand and ending stocks remaining historically high, the average received farm price has slumped below $4.00/baseunit (bu) over the ten-year forecast horizon.
“Corn planted acreage will remain steady as yields continue to increase, while wheat will, in the near term, bounce off the current low levels, but deteriorate in the long term” says Stephen Nicholson, Senior Analyst – Grains & Oilseeds.
“With domestic demand for grains steady to growing slightly, both commodities need to increase exports to work down burdensome stocks and improve prospects of higher prices.”
Corn Baseline Outlook
US corn production capacity is more than adequate to meet demand. The long-term trend of steady to slightly declining planted acres will remain in place, the report states. The persistent trend of increasing corn yields of nearly 2.0 bu/year on average delivers a growing production that is absorbed by the domestic feeding market, with extra volumes needing to move into the export channel.
Wheat Baseline Outlook
Over the ten-year baseline outlook, US all-wheat production remains relatively flat. Planted wheat acres rebound from their lows in the near term up to 53m acres, responding to higher prices, but slowly drift lower over the ten-year baseline period, slightly below 50m acres, and thus still stay (slightly) above 2018/19 levels. Wheat yields are projected to increase modestly, which drives declining wheat acres after 2020.
Farming and G&O Supply Chain Profitability
With profitability for U.S. corn and wheat expected to be under pressure due to a low price environment, producers will need to seek new avenues for their production, the report goes on to say.
This may include developing relationships directly with end users and producing the wheat demanded by end users (e.g. higher-protein hard wheat for baking bread).
However, it warns that today’s markets are being subjected to more outside influences than in the past decade – and therefore, more risks to the baseline outlook and increased price volatility are expected.