December 12, 2013
US corn demand rises as prices drop
In 2014, US corn consumption is forecast to be stronger than expected as ethanol and foreign customers are taking advantage of cheaper prices to increase demand for the crop.
In its monthly report highlighting supply and demand for crops, the USDA forecast 126 million tonnes of corn will be used to produce ethanol in the 2013-14 marketing year, a 1.3 million tonnes increase from a November estimate that reflects a strong uptick in production of the corn-based fuel since mid-October.
Corn prices are expected to average US$4.40 through August of next year compared with US$4.50 predicted last month, and down sharply from US$6.89 a year earlier. The marketing year for corn and soy begins on September 1.
The surge in ethanol output, coupled with higher foreign demand for corn, led the USDA to lower its estimate of stockpiles to 45.5 million tonnes, a decline of 2.4 million tonnes from its estimate in early November. Even though the USDA lowered its end stock estimate, the total would still be the largest carryover in eight years.
The government also cut its estimate of soy ending stocks by 545,000 tonnes to 4.1 million tonnes- largely the result of an increase in exports from last month of 682,000 tonnes. The average farm price for soy was adjusted higher to US$492.10/tonne in the 2013-14 marketing year from US$478.32 in November.
"There seems to be ample supplies in the US and around the world to meet demand," said Jason Roose, vice president of US Commodities in West Des Moines.
Corn for December delivery on the Chicago Board of Trade fell US$0.01 to US$168 following the USDA report, while January soy fell US$0.0575 to US$491/tonne.
Predictions for corn and soy production were left unchanged on Tuesday (Dec 10) by the USDA. Farmers are seen producing a record 355 million tonnes of corn and 89 million tonnes of soy. The increase in output has pushed corn prices lower by nearly 40% this year while soy is down a more modest 5%.
Traders, biofuel producers, farmers and ranchers have been closely watching the end stock numbers- figures that reflect grain supplies at the end of the crop''s respective marketing year- for signs that there would be enough corn and soy on hand to replenish stockpiles decimated by last year''s drought. After a wet start to the planting season, crops rebounded this summer.
With winter firmly in place and output from US crops unlikely to change, attention will focus on production in Argentina, Brazil and other countries as well as overseas demand for US corn and soy, according to commodity analysts.
Lisa Elliott, a commodity marketing specialist at South Dakota State University, said another wild card could come when the Environmental Protection Agency (EPA) decides whether to reduce the amount of ethanol that must be blended into the country''s gasoline supply next year. The EPA, which proposed a cut in November from the current level required by Congress, is expected to issue a final rule in the spring of 2014.