WASDE: Corn supplies to increase as demand drops

By Susanne Retka Schill | January 03, 2009
Web exclusive posted Dec. 11, 2008 at 2:03 p.m. CST

The USDA lowered its projections regarding corn use for ethanol and exports in the latest World Agricultural Supply and Demand Estimates report released Dec. 11. "Ethanol use is projected 300 million bushels lower this month as prospects for blending above federally mandated levels decline," the report stated. "Financial problems for ethanol producers are reducing plant capacity utilization for existing plants and delaying plant openings for those facilities still under construction. Falling gasoline prices have also resulted in high relative prices for ethanol, reducing blender incentives."

With lower ethanol production reducing the availability of distillers grains, corn feed and residual use were raised 50 million bushels. Corn exports were projected 100 million bushels lower, reflecting strong competition from larger foreign grain supplies and the recent slow pace of sales.

As a result, WASDE raised its projected ending stocks 350 million bushels to 1.47 billion bushels for the 2008-'09 marketing years, which compares with 1.62 billion bushels for the marketing year that closed in September and 1.3 billion bushels for the 2006-'07 marketing year. The season-average farm price was projected at $3.65 to $4.35 per bushel, down on both ends of the range from last month's $4 to $4.80 per bushel.

Globally, coarse grain supplies for 2008-'09 were projected 7.3 million tons higher this month, compared with last month's projections. China corn production was raised 4 million tons based on early provincial reports. EU-27 corn production was raised 1.4 million tons based on the latest reported data. Canada corn production was raised 700,000 tons, and barley production was raised 600,000 tons based on the latest Statistics Canada estimates. Ukraine corn production was raised 500,000 tons in line with yield indications from the final stages of harvesting. Brazil's corn output was reduced 1.5 million tons based on early season dryness for the first crop and lower expected area for the second crop. Corn production in South Africa was lowered 1 million tons, reflecting reduced area as indicated by planting intentions.

World coarse grain imports and exports for 2008-'09 were lowered in this month's WASDE report. Global exports are projected 2.3 million tons lower, mostly reflecting this month's reduction in U.S. corn exports. In particular, India's corn exports were reduced 500,000 tons. Increased exports in Brazil, Serbia, Canada and Russia partially offset this loss. Global coarse grain feeding was projected to increase by 300,000 tons as the 1.2-million-ton increase in U.S. corn was mostly offset by reductions in a number of countries. Global coarse grain consumption was projected 7.4 million tons lower, mostly because of lower expected U.S. corn-for-ethanol use. Global coarse grain stocks for 2008-'09 were projected at 165.5 million tons, up 14.6 million from last month, and the highest since 2004-'05.