Analyst looks ahead at corn use and planting intentions
Corn consumption during the 2006-07 marketing year is expected to increase in export, domestic consumption, and domestic processing categories, particularly the latter as ethanol production expands, said a University of Illinois Extension marketing specialist.
"Use this year will be near 10.9 billion bushels and could expand to 11.5 billion next year," said Darrel Good. "It appears that U.S. corn stocks at the end of the 2006-07 marketing year could be reduced to about 1.75 billion bushels, under current production and consumption expectations. "An inventory at that level would project to a 2006-07 marketing year average farm price of about $2.15 per bushel. The futures market currently reflects a 2006-07 marketing year average farm price of about $2.50."
Good's comments came as he reviewed a recent USDA report which, as expected, increased the forecast of 2005-06 marketing year exports of corn. U.S. exports are now projected at 1.9 billion bushels, 50 million more than projected last month, and 86 million more than exported last year.
"Based on large weekly export sales since the second week of January, some had expected the USDA to increase the export projection by more than 50 million bushels," said Good. "Export sales during the eight weeks ended March 2 totaled 437 million bushels. Sales during that eight-week period last year totaled only 246 million bushels. Based on the USDA's weekly Export Sales report, U.S. export commitments for the 2005-06 marketing year totaled 1.326 billion bushels as of March 2. "Of that total, 364 million bushels had not yet been shipped. The total is 135 million larger than commitments of a year ago and unshipped sales are up 98 million bushels."
Good noted, however, that USDA estimates of exports are not the estimates that are ultimately reflected in the marketing year supply and consumption balances published by the USDA. Census Bureau figures are used as the official estimates.
"For the 2005-06 marketing year, Census Bureau export estimates are available through January 2006, the first five months of the year," said Good. "While USDA estimates indicated that cumulative exports through January were six million bushels larger than the total of last year, Census Bureau figures indicated that the cumulative total was eight million bushels smaller than that of a year ago. "The difference of 14 million bushels is not large, but may be one reason that the USDA did not increase the marketing year total as much as expected. Still, the robust pace of export sales suggests that exports for the year might still exceed 1.9 billion bushels by 20 or 25 million bushels."
The pace of domestic consumption of corn during the second quarter of the 2005-06 marketing year (December 2005 through February 2006) will be revealed in the USDA's March 1 Grain Stocks report to be released on March 31.
"The quarterly pattern of feed and residual use of corn is not consistent from year to year," Good pointed out. "Last year, for example, 61.55 percent of the total feed and residual use for the year occurred in the first half of the year. In the four years prior to that, first-half use as a percentage of the total for the year was in a very narrow range of 63.7 to 64.5 percent. The average for those four years was 64 percent. "If use this year is following a 'typical' pattern and use is on track to reach the USDA projection of six billion bushels for the year, use during the second quarter should have been near 1.6 billion bushels, about equal to that of a year ago."