Urbana, Illinois
March 16, 2009
Corn
consumption during the 2009-10 marketing year could reach 12.5
billion bushels, said a University of
Illinois Extension marketing specialist.
"The 2009 crop would need to be near 12.2 billion bushels
to support consumption at that level," said Darrel Good.
"Assuming a trend yield of 152.8 bushels, 79.8 million acres of
corn would need to be harvested to produce 12.2 billion bushels.
About 87 million acres of corn would need to be planted in 2009,
then, to meet expected consumption.
"The market likely believes that less than 87 million acres of
corn will be needed in 2009 since a trend yield above 152.8
bushels is generally assumed. Each bushel above 152.8 reduces
the needed acreage by about 500,000."
In its preliminary analysis, the USDA expects 2009 corn acreage
to be near the 2008 level of 86 million, he added. Private
estimates for the March 31 Prospective Plantings report are as
low as 81 million acres.
Good's comments came as he reviewed projections of U.S. corn
consumption, noting that the USDA's updated projections during
the current marketing year serve as a reminder of the central
role that market size will play over the next several months.
"The level of corn consumption this year will determine the
magnitude of year-ending stocks, influence expectations for use
next year, and influence the amount of corn acreage needed in
2009," he said.
In the March 11 update, the USDA lowered the projection of U.S.
corn exports for the current marketing year by 50 million
bushels, to 1.7 billion bushels. That projection is 300 million
bushels less than the projection of last fall, 736 million less
than the record exports of 2007-08, and represents the smallest
exports in six years.
USDA weekly reports show cumulative export shipments through the
first 27.6 weeks of the marketing year at 851 million bushels.
Assuming that Census Bureau estimates exceed USDA estimates by
50 million bushels (as they did in the first five months of the
marketing year), cumulative exports are at 901 million bushels.
"To reach 1.7 billion, exports during the last 24.6 weeks of the
year will need to average 32.5 million bushels per week, almost
identical to the average so far this year," Good said.
As of March 5, the USDA reported that 373 million bushels of
U.S. corn had been sold for export but not yet shipped.
"New sales, then, need to average only 16.7 million bushels per
week in order for sales to reach 1.7 billion bushels," he said.
"Weekly sales since mid-January averaged 42.2 million bushels
per week.
"It now appears that exports could exceed the latest USDA
forecast, particularly since Census Bureau estimates through
January remain well above cumulative USDA estimates."
The USDA increased the forecast of the amount of corn to be used
for ethanol production during the current marketing year by 100
million bushels, to a total of 3.7 billion. The forecast is 674
million bushels more than used in that category last year.
"The USDA cited record ethanol use in December, continuing
recovery in the production of gasoline blends with ethanol, and
more favorable blender margins as reasons for the increase," he
noted. "The projection implies that ethanol production and use
will proceed at a rate that exceeds the minimum required by the
Renewable Fuels Standards (RFS).
"That projection appears a little optimistic."
Spot market margins for ethanol producers have dropped to the
lowest level since USDA began reporting plant level prices in
January 2007, he noted.
"Ethanol prices, then, may have to continue to exceed energy
value plus the 45 cents per gallon blender tax credit in order
to ensure sufficient ethanol production to meet the mandated
level of consumption," he said. "The necessity for ethanol
prices to exceed value suggests that blenders will blend only
the minimum amount of ethanol required. An increase in the
maximum blend level would not overcome the lack of economic
incentives to blend more ethanol.
"The outlook for ethanol production to be driven by the RFS
appears to be supported by the positive values being paid for
previous excess production to meet the current year's mandate."
For the 2009-10 marketing year, the RFS implies that even more
corn will be used for ethanol production. The minimum level of
use of renewable biofuels is 10.5 billion gallons in 2009 and 12
billion gallons in 2010. The 1.5 billion gallon increase
represents about 500 million bushels of corn.
"We suspect that U.S. corn exports will also recover during the
2009-10 marketing year on the basis of smaller grain crops in
the rest of the world and perhaps some economic recovery in
2010," said Good.
"Domestic feed and residual use of corn during the upcoming
marketing year will likely continue to decline under the weight
of increased production of distillers grain. Some rebuilding of
livestock production, however, may occur in 2010."
By Bob Sampson, University of
Illinois |
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