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Slight demand growth provides small price gains for corn prices

USDA lowers ending stocks on increased ethanol sector demand.

While U.S. corn production remains on track to set another record, increased demand from the ethanol sector is expected, the U.S. Department of Agriculture (USDA) recently reported. Given increased ethanol demand, USDA lower ending stock forecasts and prices were raised slightly.

"Despite the mildly positive changes to demand shown in this report, America’s corn farmers need further market growth to positively impact the ongoing pricing situation so negatively affecting rural economies," said National Corn Growers Association (NCGA) chairman Wesley Spurlock, a farmer from Texas. "While growth in the ethanol market is essential, our farm families also need growth in the livestock and export markets to improve market conditions. Whether it be promoting the trade agreements farmers need in Washington or building demand for higher blends of ethanol across the world, NCGA strives to help farmers grow markets for their growing crop.

Spurlock said the USDA’s report on increased ethanol demand demonstrates the importance of the North American Free Trade Agreement in supporting the economic health of America's farmers and rural communities.

“Despite the record supply projections, increased demand from Mexico, the largest export market for U.S. corn in the 2015/2016 year with 525 million bushels, helps support prices. Without market-opening trade agreements, we might not be in this position in the future," he explained.

NCGA noted that production forecasts remained stable from last month’s report, with the 2017/18 estimate holding at a record 14.78 bushels. Yield forecasts also held at the estimate issued last month, 175.4 bushels per acre. This would set another record-high for the U.S. average yield per acre for corn, which currently rests at 174.6 BPA.

Demand from ethanol markets was raised by 50 million bushels, and now is forecast at 5.525 billion bushels, given increased sorghum exports and thus decreased sorghum for ethanol availability as issued in the USDA’s “Grain Crushings and Co-Products Production Report.” Since this was the only change to production or demand, USDA lowered ending stocks by a corresponding 50 million bushels. Given the impact of these estimates, the prices expected for the crop rose slightly to a range of between $2.85-3.55 per bushel.

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