Considerable uncertainty about both corn supply and demand

decrease font size  Resize text   increase font size       Printer-friendly version of this article Printer-friendly version of this article

July 2012 corn futures are currently trading about $1.00 below the peak reached in August 2011, but $1.40 above the low reached a month ago. December 2012 futures are trading $1.50 above the low of June 15, 2012 and within $0.15 of the high reached on August 31, 2011.

Much of the recent strength in corn prices has been associated with very hot, dry conditions in the central and eastern Corn Belt and indications that yield prospects have been reduced substantially in those areas. As much of the crop in the Corn Belt has or soon will enter the reproductive stage, the market will continue to try to determine production prospects. In addition, the market is assessing the likely strength of demand to determine what price is needed to balance potential supply with likely consumption.

On the demand side, corn exports continue to lag the pace needed to reach the USDA projection of 1.65 billion bushels for the current marketing year. With 9 weeks left in the year, inspections need to average about 33 million bushels per week to reach that projection. The average for the five weeks ended June 28 was only 25 million bushels. A shortfall in exports would add to year-ending stocks and available supplies for next year. The USDA has projected exports during the 2012-13 marketing year at 1.9 billion bushels. Sales for export next year stood at 233 million bushels on June 21, compared to 190 million bushels at the same time last year and the average of only 60 million bushels for the 10 years from 2001 through 2010. Early sales are not always a good indicator of actual exports, but the large early sales support the USDA projection.

For the current marketing year, the USDA has projected corn use for ethanol production at 5.05 billion bushels. 0.6 percent more than used last year. Through the first 10 months of the year, ethanol production is up about two percent, so the projection is likely to be reached. However, ethanol production is now slowing as the combination of lower gasoline prices and higher corn prices has squeezed margins for both producers and blenders of ethanol. The Renewable Fuels Standards require a 600 million gallon (4.5 percent) increase in renewable biofuel blending in 2013, but if margins remain under pressure, part of that requirement could be met with credits associated with excess production in 2011 and 2102, rather than with actual ethanol production. If that occurs, corn consumption for ethanol production would fall short of the USDA projection of 5 billion bushels for the 2012-13 marketing year.

The domestic feed and residual use of corn totaled about 4.215 billion bushels during the first three quarters of the current marketing year, about 119 million less than during the same period last year. For the year, the USDA has projected use at 4.55 billion bushels, 243 million less than used last year. To reach the projection, use during the fourth quarter would need to be only 335 million bushels. Based on historic levels of use and the current livestock and poultry inventory, use would be expected to be much larger during the quarter than needed to reach the projection.

Apparent consumption in the summer quarter, however, is expected to be reduced by the larger than normal harvest and consumption of new crop corn before September 1. The September 1 inventory estimate is intended to reflect only old crop inventories. If new crop corn is consumed before September 1, it gets reflected in the feed and residual estimate of old crop corn in the fourth quarter regardless of what it is used for. Larger than normal consumption of new crop corn results in a smaller level of old crop use and larger old crop stocks on September 1 than otherwise would have occurred. On the other hand, consumption of the newly harvested crop before September 1 results in an inflated estimate of use during the first quarter next year. The current USDA forecasts reflect this expectation, with feed and residual use next year projected at 5.45 billion bushels. Even with some of that expected consumption occurring this year, the projection appears too large. The bottom line is that new crop corn prices are likely high enough to result in less consumption in 2012-13 than currently forecast.

The dilemma, however, is it is far from clear how much corn will be available next year. At current prices, consumption next year might be closer to 13.3 billion bushels rather than 13.775 projected by USDA. To maintain year-ending stocks at 850 million bushels, production would also have to total 13.3 billion bushels. With acreage harvested for grain at 88.851 million, the U.S. average yield would need to be near 150 bushels to produce 13.3 billion bushels. Based on recent and upcoming weather, there is considerable risk that the yield will be below that level. If so, additional rationing and even higher prices will be required.

Buyers Guide

Doyle Equipment Manufacturing Co.
Doyle Equipment Manufacturing prides themselves as being “The King of the Rotary’s” with their Direct Drive Rotary Blend Systems. With numerous setup possibilities and sizes, ranging from a  more...
A.J. Sackett Sons & Company
Sackett Blend Towers feature the H.I.M, High Intensity Mixer, the next generation of blending and coating technology which supports Precision Fertilizer Blending®. Its unique design allows  more...
R&R Manufacturing Inc.
The R&R Minuteman Blend System is the original proven performer. Fast, precise blending with a compact foot print. Significantly lower horsepower requirement. Low inload height with large  more...
Junge Control Inc.
Junge Control Inc. creates state-of-the-art product blending and measuring solutions that allow you to totally maximize operating efficiency with amazing accuracy and repeatability, superior  more...
Yargus Manufacturing
The flagship blending system for the Layco product line is the fully automated Layco DW System™. The advanced technology of the Layco DW (Declining Weight) system results in a blending  more...
Yargus Manufacturing
The LAYCOTE™ Automated Coating System provides a new level of coating accuracy for a stand-alone coating system or for coating (impregnating) in an automated blending system. The unique  more...
John Deere
The DN345 Drawn Dry Spreader can carry more than 12 tons of fertilizer and 17.5 tons of lime. Designed to operate at field speeds up to 20 MPH with full loads and the G4 spreader uniformly  more...
Force Unlimited
The Pro-Force is a multi-purpose spreader with a wider apron and steeper sides. Our Pro-Force has the most aggressive 30” spinner on the market, and is capable of spreading higher rates of  more...
BBI Spreaders
MagnaSpread 2 & MagnaSpread 3 — With BBI’s patented multi-bin technology, these spreaders operate multiple hoppers guided by independent, variable-rate technology. These models are built on  more...

Comments (0) Leave a comment 

e-Mail (required)


characters left

Tube Series (TS) Conveyors

USC’s Tube Series Conveyors combine the gentleness of the signature Seed Series with the traditional stability of a tube-style conveyor, ... Read More

View all Products in this segment

View All Buyers Guides

Feedback Form
Feedback Form