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Corn rationing not happening yet

04/11/2011 @ 7:17am

CHICAGO, Illinois (Agriculture.com)--Despite the USDA leaving the U.S. 2010-11 corn and soybean ending stocks left unchanged in Friday's report, the market remains nervous that demand threatens tighter stockpiles.

In its April Supply/Demand WASDE Report Friday, the USDA estimates the 2010-11 soybean carryout at 140 million bushels, equal to its March estimate. Plus, the U.S. 2010-11 corn carryout is set at 675 million bushels, unchanged from the government's March estimate.

Glen Hollander, Hollander & Feuerhaken president and CME Group corn floor trader, says the trade learned Friday that demand has not yet been curbed.

"The market started lower, but even a report, considered by many to be bearish, couldn't keep the market down," Hollander says. 

End-Users

In Iowa, there is an ethanol plant paying farmers $0.55-$0.60 per bushel over the September futures price of $7.11.  

Hollander says this is further proof the demand is not waning. "It sounds like a silly number to be offering the farmer. But, that's what it is going to take to buy corn."

For weeks, industry experts have been saying that ethanol producers would be the first end-user to get scared of higher corn prices. 

However, with margins remaining strong, there's uncertainty as to what price will ration demand, Hollander says.

"Crude oil is up $2.32 per barrel, gas is shooting higher, and heating oil is up $0.10 per gallon, do you think ethanol is going lower?"

When the corn price retreated to $6.08, a few weeks ago, it then shot back up to $6.80 and the ethanol producers, livestock feeders and processors had all the chance in the world to buy and they did, Hollander says.

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