What is in this article?:
- Monitoring corn consumption
- Ethanol production estimates
• A pace of consumption that cannot be supported implies the need for higher prices, while a slower pace than required implies the need for lower prices.
Ethanol production estimates
Weekly estimates of ethanol production from the U.S. Energy Information Administration reveal that ethanol production during the first seven weeks of the marketing year was eight percent less than during the same period last year.
For the two weeks ended, Oct. 19, production was down 12 percent from that of last year. The year-over-year reductions are likely to continue to be large, at least through the end of the calendar year.
Last year, ethanol production accelerated in November and December in anticipation of the expiration of the blender’s tax credit on Dec. 31, 2011. However, the current weekly pace is sufficient for corn consumption for ethanol and by-product consumption to reach 4.5 billion bushels for the year.
The upcoming decision by the EPA in regards a partial waiver of the Renewable Fuels Standards is not expected to have a substantial impact on ethanol production in the near future (see our analysis here).
The estimate of Dece. 1, 2012 stocks, to be released on Jan. 11, 2013, will allow for the calculation of feed and residual use during the first quarter of the 2012-13 marketing year. Until then, expectations about the likely pace of feed consumption are based on anecdotal information such as livestock inventories, slaughter numbers, and slaughter weights.
In the case of cattle, feedlot inventories are declining, down three percent on Oct. 1, and are expected to continue to decline as the result of the smaller supply of feeder cattle.
The number of cattle slaughtered in September was 12 percent smaller than in Sept. 2011, although average weights were up three percent.
The inventory of market hogs on Sept. 1 was about equal that of a year earlier. Sow farrowings were down about three percent in the fall quarter, but intentions for the winter quarter were off only one percent.
Slaughter numbers in September were down about two percent. The number of dairy cattle is declining; with the inventory on Sept. 1 about equal that of a year ago.
Numbers are expected to decline below last year’s inventory as the year progresses.
Placements of broiler-type chicks continues at or slightly above last year’s pace, although broiler-type egg sets declined sharply during the week ended Oct.20.
Year-over-year chicken slaughter was down about eight percent in September
Taken together, current livestock data suggest that the pace of feed and residual consumption of corn has slowed and will continue to slow even though the pace of wheat feeding has likely slowed substantially and supplies of distillers’ grains are smaller than those of a year earlier.
Corn consumption is clearly slowing, but the pace may not yet be sufficiently slow to ration the available supplies. This suggests that, while higher prices are not likely needed, current price levels will be maintained a while longer.