By Mark Welch
Editor’s Note: Mark Welch is a Texas AgriLife Extension Economist. Opinions and recommendations expressed are solely those of the author and are intended for educational purposes only. Texas AgriLife Extension Service assumes no liability.
USDA issued numbers on Jan. 12, 2012, showing a tighter domestic corn situation, but not as tight as the trade anticipated. U.S. corn ending stocks are now estimated at 846 million bushels, down from 848 last month. Production increased on higher yields (+0.5 bu/A) and increased harvested area (+100,000 acres). Domestic use categories were unchanged, but exports increased 50 million bushels, tightening stocks by 2 million. The stocks-to-use ratio now stands at 6.69 percent, down slightly from the 6.73 percent in December.
World corn supplies increased slightly with production up 0.5 mmt primarily in the U.S., EU and FSU. World corn use is down 0.6 mmt, raising ending stocks about 1 mmt. The world corn stocks-to-use ratio increased from 14.64 percent in December to 14.76 percent Jan. 12. The days of use on hand at the end of the marketing year increased from a 53.45 day supply to 53.88. China’s corn imports were raised from 3 to 4 mmt for the 11/12 marketing year. Note that the stocks-to-use ratio in China is estimated at 30.4 percent, twice that of the world, and four times that of the U.S. Going into Jan. 12, the average trade guess for corn stocks in all positions on Dec. 1 was 9.391 billion bushels; USDA reported 9.642, up about 250 million bushels. This is still below last year and below the five-year average.
U.S. corn export sales for the week of Jan. 5 were about 13 million bushels, near the lows of the marketing year. The average so far is about 26 million. Nonetheless, USDA raised export sales by 50 million bushels to 1.65 billion for 2011/2012 in today’s supply and demand estimates. That raises the pace of sales needed to reach the annual target to 35 million. Next week’s export numbers will be for a week with an average nearby futures price of $6.48, about even with this week’s (week of Jan. 12) $6.50.
2012 Corn Marketing Plan
Nothing fundamentally changed in the corn market as a result of the Jan. 12 WASDE and Grain Stocks reports: We still have the tightest U.S. corn supply situation since 1995/96, world supply levels are at record lows, corn use went up on a brighter export outlook, and corn in storage is less than last year and below the five-year average. Corn closed the day climbing higher from initial lows.
If production concerns in South America and tight supplies worldwide are not enough to support the market from here, I am prepared to price a portion of the 2012 crop at any time, using technical signals to trigger that sale. I expect the market to stabilize from here as corn users take advantage of this pullback in prices, and the market buys the corn acres necessary to keep pace with demand in 2012.