Corn and Wheat revisit
Hi. I've been looking at the WASDE from last month going over the 14/15 and 15/16/ and16/17 carryover numbers in corn and wheat. In so far as corn: in 14/15, the world carryover was 208mmt with China and the US accounting for 144mmt total, leaving the rest of the world at 64mmt. In 15/16, the world carryover was 210mmt with the US and China accounting for 160mmt, leaving the rest of the world at 56mmt. As for 16/17, the world carryover is projected to be 217mmt with US and China accounting for 162mmt, leaving the rest of the world at 65mmt. In the same time period, usage has gone up around 50mmt/yr. With China cutting back on corn usage and in the process of using up their surplus(latest est carryover at 95mmt) and the US(as of now) projected to cut corn acres by 4 million or production around 680 million bu or 17mmt, world carryover will fall to around 190mmt, assuming SA can achieve the lofty production numbers-2nd crop corn isn't even half planted. Based on the Real gaining 50% since last spring/summer, I can see US corn demand not faltering much. If you factor in increased usage, any kind of problem could put a dollar on the corn, if not more, just to retain acreages without getting into cutting demand. Remember, China in depleting their reserves and they have approx 50% more corn carryover than we do
As for wheat, in 14/15 world carryover was 217mmt with US ans China accounting for 96mmt, leaving the rest of the world at 121mmt. In 15/16, the world carryover was 240mmt with the US and China accounting for 124mmt, leaving the rest of the world at 116mmt. As for 16/17, the world carryover is projected to be 253 with China and the US at 143, leaving the rest of the world at 110mmt. Even with US prod expected to decline 20-30mmt, thats still a lot of wheat. China's share of world carryout increased from 76mmt to 111mmt in the same time frame, along with world increased usage of 35mmt.
Bottom line is: China is holding a lot of the world's corn and wheat reserves-about half. I call the China corn and wheat "phantom" because its counted but nobody sees it. Question is: How strongly will the world users react to a real or imagined shortage in the US or SA knowing China doesn't seem to want to export it now while there is enough to go around. Will China export in the event of a shortage? I don't think they will as they built the stocks in case of a shortage. Their stocks may not be in good condition, either. Based on world usage, the stocks to use ratio of US stocks to world usage in pretty shallow. Anyway, that is why I can agree with the corn and wheat recent rally. What say you?
Re: Corn and Wheat revisit
thanks for providing that perspective. It puts the idea of the "world awash in wheat"in a little different light, and even more so with corn. Seems like there may be better pricing opportunities in the future for those who can wait, and resist getting succked up in all the doom and gloom.