Wednesday, December 28, 2016

Corn Futures In 2017: Analysts Weigh In

We're posting two of the seven analyst comments, Goldman because it's always good to know what they're telling the world and Rabobank because over the years they have shown some actual forecasting 'skill', in the forecast modeler's sense of the word.
Follow the link for the other five.

From Agrimoney:

Corn futures - will they ditch their losing streak in 2017?
Chicago corn futures look poised to record a further (if small) loss in 2016 – making it a third successive year of decline.
Indeed, futures look set to record their weakest finish to a calendar year since 2005, with prices weighed by the boost to supplies from another record US crop, which more than offset support to values from a weaker-than-expected Brazilian safrinha corn harvest.
Still, after 2005, corn prices went on quite a rally, rising in five of the six following years.
Will low prices be the cure for low prices this time, in persuading farmers to cut corn acreage? Or will the market be depressed by a, likely, improved Brazilian safrinha crop?
Experts give their views on the prospects for corn prices in 2017....
...Goldman Sachs
Despite concerns late last spring that La Nina weather conditions would weigh on growing conditions, the US 2016-17 harvest ended up record large for both corn and soybeans.
Further, with only weak La Nina weather conditions currently, the beginning of the South American growing season is so far taking place under favourable conditions.
As a result, we expect that under normal weather conditions going forward corn and soybeans prices will decline back to their marginal costs of production over the coming year to limit further inventory builds.
Continued strong soybean demand from China leaves us, however, forecasting that soybeans prices will continue to trade at a historically elevated premium over corn prices to continue to incentivize acreage allocation....
The ongoing global stockbuilding of corn is forecast to come to a halt in 2016-17, and 2017-18, we expect the first worldwide stock decline since 2009, moving the stocks-to-use ratio to 19%, the lowest in four years.
We need to add clarity to one fact in this equation – China. Due to changes to the corn subsidy policy, the country is expected to cut its stocks by about 10m tonnes n 2016-17 and by about twice as much the year after.
While the overall stocks in the world, excluding China, will remain at a comfortable level, they are expected to shrink 6% year on year in 2017-18.
Assuming normal weather conditions in South America… this should result in an increase of the combined corn crop in Brazil and Argentina of about 26%, or 25m tonnes.
Our base case price forecast leaves Chicago corn prices in a quarterly average $3.40-3.65 a bushel range, pressured by large supplies, and supported by record large demand and continued large-scale farmer storing in the US....