The 2011-2012 corn marketing year is approaching the half-way point. At this time of year, prospects for marketing year consumption and ending stocks are often fairly clear and the market begins to focus more on new crop prospects.
This year, consumption, stocks, and price prospects are far from clear. There is considerable uncertainty about the pace of consumption for the rest of year in each of the major categories. If anything, the uncertainty outlined two weeks ago has intensified.
The surprisingly small estimates of feed and residual use during the last half of the 2010-2011 and first quarter of the 2011-2012 marketing years had created expectations of a “correction” to be revealed in upcoming USDA Grain Stocks reports. Now, the on-going year-over-year decline in broiler production, prospects for fewer numbers of cattle on feed later in the year, and the relatively mild winter weather to date point to some slowdown in feed use, whatever the pace actually is.
Ethanol production during the first 5 months of the current marketing year was nearly 3 percent larger than in the same period last year. That rapid pace of production suggested that corn used for ethanol and co-product production for the year might exceed the USDA projection of 5 billion bushels. Ethanol production in the last quarter of 2011 was likely accelerated by the impending expiration of the blenders’ tax credit. Stocks of ethanol have now accumulated and prices have declined sharply from the record high levels of late 2011. Margins for ethanol producers have also declined sharply as the result of lower ethanol prices and the recent rebound in corn prices. Combined with the rapidly approaching domestic “blend wall” and the uncertainty of ethanol exports, prospects for ethanol production in the last half of the marketing year have become less clear.
Corn exports started the year very slowly. Exports during the first quarter were 47 million bushels (10.4 percent) smaller than in the same quarter last year and at the lowest level in 9 years. The pace of exports accelerated a bit in December and January. As of February 2nd, cumulative export inspections were nearly equal to those of a year earlier.
As of January 26, unshipped export sales were only 50 million bushels smaller than those of a year earlier. Shipments and sales appear to be on a pace to exceed the USDA projection of 1.65 billion bushels for the year.
Export prospects might be further enhanced by expectations for further reductions in the projected size of the upcoming Argentine harvest. The USDA reduced that forecast by 120 million bushels (10 percent) last month.