The effects of last year’s drought “really tightened the supply of U.S. corn,” Glidewell says. “We’re down to a 5.3 percent stocks-to-use ratio — the tightest in my grains career. We got close to that in 1996, but this is one of the tightest ratios we’ve seen in many years.

“With a 602 million bushel carryout projected for this year’s crop, it tells us that somehow the market will have to ration corn. We’ll have to see some potential rationing of corn this summer. This can come in many different ways: higher prices, users can find ways to stretch the existing supply by substituting other feed grains and components, or some potential cuts in the grind rate of ethanol.”

Glidewell says a 602 million bushel carryout “is close to, and some would suggest below, the pipeline supply level — the minimal amount needed to support industries dependent upon corn.

“I think the one area we’ll continue to ration is the export sector. The U.S. doesn’t need to export any corn with this kind of extremely low carryout and stocks-to-use ratio. So, we’ll probably see little export activity for U.S. corn until the new crop starts coming in.”

Projected world ending stocks numbers have drifted considerably lower from last year, Glidewell says, to some 60 million metric tons, largely the result of the U.S. drought. “The world stocks-to-use ratio is still very tight, under 15 percent.”

Wheat stocks worldwide, for all classes, are “still a comfortable 26 percent to 27 percent,” he says.

“Because wheat is grown in so many areas of the world and is a staple food, world stocks can recover more quickly from a shortfall in one part of the globe. U.S. wheat stocks, as a whole, are not at a burdensome level, but are a very comfortable 29.5 percent.

“I think feed demand will be an important component going through the summer, as the market searches for alternatives to corn. The soft red wheat that we grow in the South is today the cheapest wheat in the world, and that bodes very well for capturing demand that should show up between now and July.

“Hard wheats are a little tighter. World stocks have been drawn down sharply due to the drought in Russia and Ukraine this past year, and to some extent in Europe. While they’ve come down some 20 million metric tons, we still have comfortable world stocks.”

Weather “will continue to be the single most important fundamental factor in the grain markets in this area of very well aligned supply and demand,” Glidewell says. “We can’t afford a significant shortfall in any major commodity without a significant price reaction.”

hbrandon@farmpress.com