The size of the U.S. corn crop will be the most important price factor in that market for the next few months, according to a University of Illinois agricultural economist.
“The market is expecting a crop large enough to meet consumption needs without price rationing, but is not expecting as large an increase in marketing year-ending stocks as projected a month ago,” said Darrel Good. “The USDA’s production forecast to be released on Sept. 12 will provide for updated projections of marketing-year consumption, ending stocks, and average farm price.”
Good said that, at the margin, the size of the inventory of old-crop corn on Sept. 1 will also influence the expected balance of supply and consumption during the current marketing year. Consumption of corn during the final quarter of the 2012-13 marketing year may have exceeded the USDA’s projection in the August World Agricultural Supply and Demand Estimates (WASDE) report. “If so, stocks of old-crop corn on Sept. 1 may have been smaller than currently projected,” Good said. “The consumption of corn for ethanol and byproduct production for the year that just ended was projected at 4.65 billion bushels. The USDA estimates that 3.448 billion bushels were used for that purpose during the first three quarters of the marketing year. That’s 9.7 percent less than consumption during the same period a year earlier and is in line with the 9.3 percent reduction in ethanol production reported by the U.S. Energy Information Administration.
“To reach the 4.65 billion bushels projected for the year, consumption during the final quarter would have been 1.202 billion bushels, 0.85 percent more than consumption of a year earlier,” Good said. “While final estimates of ethanol production for July and August are not yet available, weekly estimates suggest that fourth-quarter ethanol production was 3.5 percent larger than production of a year earlier. If that was the case, corn consumption was likely near 1.227 billion bushels for the quarter and near 4.675 billion bushels for the year.”
Corn exports during the 2012-13 marketing year were projected at 715 million bushels. The U.S. Census Bureau reported that exports during the first 11 months of the marketing year totaled 672 million bushels.
According to Good, exports of 43 million bushels during August would have been required for the marketing-year total to reach that projected amount of 715 million bushels. The USDA’s weekly report of export inspections indicated shipments of 56 million bushels for the month. It appears that marketing-year exports may have been near 730 million bushels,” Good said.