Preliminary yield reports optimistic, but outcome still unknown

By Jason Sagebiel | October 11, 2013

Sept. 30—The potential of 1.8 billion bushels of corn stocks looms over the horizon with the possibility of a major shift in acres remaining. Preliminary yield reports have been optimistic for corn, however, later planted crops have to yet to offer yields. With production projected at 13.8 billion bushels, demand at 12.6 billion bushels and carry-in from last year at 661 million bushels (expected to increase with the September stocks report), overall carryout is projected at 1.855 billion bushels. Therefore, the supply/demand table has wiggle room on the supply and production side. The livestock sector is expected to consume 5.1 billion bushels, exports 1.225 billion bushels, ethanol 4.90 billion bushels and other industrial usage 1.45 billion bushels. Feed demand and higher ethanol demand (meaning more coproduct production) would leave room for bigger livestock placements or more coproduct exports.

World corn carryout is estimated at 151.42 million metric tons, up from last year’s 122.59.  The current world corn-stocks-to-use ratio is 16.3 percent, the highest ratio in three years. The increase in U.S. and world stocks will keep the market upside potential limited barring a weather threat in South America. The market anticipates more soy production out of that region as crop and currency economics warrant it. Stay tuned for a perceived bearish October outlook to report U.S. carryout for 2013-'14. 

With the projected carryout in the corn market and inverted ethanol markets going forward, ethanol production margins look disappointing while forward coproduct values look attractive.