What is in this article?:
- How large does the 2013 corn crop need to be?
- Blend wall to expand
• Assessing consumption potential for the upcoming marketing year is not straightforward, because consumption depends on the strength of demand in each of the major consumption categories as well as the price of corn.
• The price of corn, in turn, will be influenced by the size of the U.S. crop.
Blend wall to expand
“The blend wall is expected to expand only slowly during the 2013-14 corn marketing year due to limited market penetration of both E15 and E85 and lack of growth in motor fuel consumption.
“Assuming a small, positive trade balance and slow growth in domestic ethanol consumption, about 13.3 billion gallons of ethanol could be produced during the 2013-14 corn marketing year, requiring about 4.84 billion bushels of corn.
“Corn used for other industrial and food products has been very stable in recent years, near 1.4 billion bushels. Use at that level next year would point to total domestic non-feed use of corn near 6.24 billion bushels,” Good said.
Domestic feed and residual use of corn peaked at 6.15 billion bushels in 2005-06 and then trended lower as distillers’ grains from the ethanol industry replaced corn in livestock feed rations.
Use was estimated at 4.545 billion bushels last year and is projected at 4.4 billion bushels for the current year. Use in that category is thought to be the most price sensitive so that consumption during the 2013-14 marketing year will depend more heavily on the size of the crop.
“Assuming the 2013 corn crop is larger than that of 2012, that there is some modest expansion in pork and broiler production, and that there is some modest increase in production of distillers’ grains, feed and residual use of corn might recover to about 4.8 billion bushels during the upcoming marketing year,” Good said.
“From 2003-04 through 2009-10, annual U.S. corn exports ranged from 1.8 to 2.4 billion bushels,” he added. “Forecasting exports near the average of 2 billion bushels represented a reasonable expectation. Exports, however, declined to 1.54 billion bushels last year and are projected at only 800 million bushels for the current marketing year.
“Another large crop in Brazil and a rebound in Argentine production this year may limit the rebound in U.S. exports during the year ahead. A key demand uncertainty is the likely size of the Chinese market. Exports can be forecast with very little confidence.
“A very modest 110 million bushels of U.S. corn have been sold for export next year. As a starting point, we use a projection of 1.2 billion bushels.
“Based on current conditions, an expectation of a market for 12.2 to 12.3 billion bushels of U.S. corn in 2013-14 seems reasonable,” Good said.
“A crop of 12.5 billion bushels then would be large enough to supply the market and add a small amount to year-ending stocks.
“A crop of that size would be 2.1 billion bushels, or 14 percent, smaller than production prospects based on planting intentions and trend yield. Prospects have not yet been reduced by that amount,” Good said.
The USDA will provide an assessment of potential supply, consumption, and price prospects for the 2013-14 corn marketing year in the May 10 World Agricultural Supply and Demand Estimates (WASDE) report.
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