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• Without a meaningful increase in the U.S. production estimate in January, corn prices appear low enough to encourage the increase in consumption made possible by the large 2013 crop.
“Considering the previous 30 years, the January yield estimate was above the November forecast 16 times and unchanged or lower 14 times,” he said.
Good said that historically, the January corn production forecast was more heavily influenced by changes in acreage estimates than is currently the case because administrative data (primarily FSA-certified acreage data) were not fully incorporated in the NASS estimates until then.
More recently, that data has been incorporated in the October production forecast (November this year).
In the six years since 2003, in which the January production estimate exceeded the November forecast, the difference exceeded 80 million bushels of corn only in 2009 (230 million bushels).
In the four years when the January production forecast was smaller than the November forecast, the difference ranged from 93 to 210 million bushels.
“Recent history suggests there is a small probability the January production estimate this year will be large enough to substantially alter expectations of year-ending stocks,” Good said.
“The price impact of the production estimate, however, will be co-mingled with the price response to the estimate of Dec. 1, 2013, corn stocks to be released on the same day,” he said.
In preliminary rule-making for 2014 announced on Nov. 15, the U.S. Environmental Protection Agency proposed to effectively reduce the mandate for renewable biofuels (primarily corn-based ethanol) in 2014 from the statutory requirement of 14.4 billion gallons to 13 billion gallons.
“Some have interpreted this to mean that, if implemented, the rules would result in less corn consumption for ethanol production during the current marketing year than would have otherwise occurred,” Good said. “That may or may not be the case. Without a change in the rules, blending of ethanol in the domestic motor fuel supply during the 2013-14 corn-marketing year would still have been limited by the 10 percent blend wall and consumption of relatively small quantities of higher blends.
“Domestic consumption would have been well short of 14.4 billion gallons and maybe less than 13.3 billion gallons.
“The proposed change in the RFS mandate does not necessarily substantially alter prospects for domestic ethanol consumption during the current corn-marketing year,” Good added.