Wednesday, June 19, 2024

Market Outlook October 2012

Fertility treatment options and hybrid testing program benefit corn producers

By Rick Mascagni

Editor’s Note: Mark Welch, Texas AgriLife Extension Economist, is based in College Station, Texas. The opinions and recommendations expressed are solely those of the author and are intended for educational purposes only as part of the Texas AgriLife Extension Service. Texas AgriLife Extension Service assumes no liability for the use of this information. This edition of Welch’s Feedgrain Market Outlook was released on Sept. 18, 2012.


USDA revised the estimated yield for the U.S. corn crop down from 123.4 bushels per acre in August to 122.8 bushels in the September, World Agricultural Supply and Demand Estimates (WASDE) report. This is 23 percent below the trend line estimate, about the same amount the 1988 yield fell below trend. Harvested acres were left unchanged at 87.4 million, resulting in a production estimate of 10.73 billion bushels, 52 million less than last month.

However, lower feed use and exports in the 2011/2012 marketing year increased the beginning stock number for 2012/2013 by 160 million bushels. Feed use for 12/13 increased 75 million bushels, exports decreased 50 million, and ending stocks went up 83 million bushels. The stocks-to-use ratio increased from 5.8 percent last month to 6.5 percent currently.

World corn supplies also received a bump up from last year with +3.6 mmt increase in beginning stocks; production declined eight mmt, use is off five mmt, with a resulting net increase in ending stocks of 0.62 mmt. Measured by days of use on hand at the end of the marketing year, world corn supplies increased from an estimated 52-day supply in August to 53 days of corn on hand in the September estimate.

Fuel And Feed Use

The monthly Short Term Energy Outlook from the Energy Information Agency reported a 67 million gallon decline in U.S. ethanol use from July to August. From January through August, ethanol use is +155 million gallons in 2012 compared to 2011. The weekly ethanol stocks report showed a nine million gallon increase in ethanol stocks for the week ending Sept. 7; stocks are up 75 million gallons compared to this time last year.

USDA’s Feed Grain Database shows a continued decline in the number of grain-consuming animal units and energy feed per grainconsuming animal. Total grain-consuming animal units in 2012 is down 1.48 million from 2011 led by poultry (-0.50 million), hogs (-0.47 million) and dairy and cattle on feed (- 0.45 million). After accounting for distillers’ grains going into the feed supply, energy feed per grain-consuming animal unit is down from 1.57 mt in 2011 to 1.49 in 2012.

Exports/Outside Markets

On Sept. 13, export numbers showed early marketing year weakness in U.S. corn export sales. For the week of Sept. 6, sales of 8.46 million bushels were reported. This is about half of the 16.63 million weekly sales needed to reach USDA’s 2012/2013 projection of 1.25 billion bushels.

The biggest news driving commodity prices last week came from the Federal Reserve when Chairman Bernanke announced on Sept. 13 a new round of Quantitative Easing. This move is a signal by the Fed that it intends to keep interest rates low for at least the next three years (mid-2015).

The difference in this announcement of economic stimulus is the Fed’s intention to extend the program until there is substantial improvement in the outlook for the labor market.

Marketing Strategies

Commodity prices in general got a boost from the move by the Fed to keep interest rates low, encouraging investors to move money into riskier investments like stocks and commodities. Grain prices gave back all those gains on Sept. 17 as traders took profits and seem less concerned about near-term supplies.

I have completed all of my pre-harvest sales for 2012. I have another 20 percent to price at harvest (early October). On a downturn in this market, I will look to start pricing 2013 grain.

At this point, the December 2013 contract has not yet broken as hard as the nearby contract.

Related Articles

Connect With Corn South

E-News Sign-up