With the USDA announcing larger supplies of U.S. corn ending stocks, the futures market took prices lower in mid-February.
The CME Group corn charts indicated daily moves lower during the first half of February.
Looking at the May 2013 corn future in early January, the future reached a low of just under $6.80 per bushel. Prices pushed back up to $7.35 in mid-January, before moving to $7.45 on Feb. 1. The future remained 20 cents shy of its $7.65 price in late November 2012.
From Feb. 1 through Feb. 13, the future moved steadily lower to $6.85, before rebounding to $6.97 on Feb. 15.
Limited exports and reductions in ethanol production led to the lower corn futures contracts, despite the short 2012 crop.
According to Darrel Good, University of Illinois Extension grain economist, the projection for 2012/13 U.S. corn exports is the lowest in 41 years.
The USDA estimates exports at 900 million bushels, and the U.S. needs 14 million bushels of corn export sales weekly to meet the USDA’s projection.
On Feb. 14, the USDA reported weekly sales of 225.4 million metric tons (8.873 million bushels). Sales reached 57.5 percent of the USDA’s 2012 estimate vs. 68.4 percent for the five-year average by this point in the marketing year.
“With prospects for a much larger corn harvest in Argentina, and another large crop in Brazil this year, there is some chance that the exports will fall short of the current projection,” wrote Good in his weekly column, ‘Weekly Outlook.’
Argentina is expected to produce a 27 million metric ton corn crop (1.062 billion bushels). Brazil’s corn crop is estimated at 72.5 million metric tons (2.85 billion bushels).
On the CME Group exchange, corn traded on Feb. 15 with March at $6.98, May at $6.96, July at $6.84, September at $5.81 and December at $5.62 per bushel.
Compared with prices on Feb. 1, March was 45 cents lower, May was 49 cents lower, July was 53 cents lower, September was 37 cents lower and December was 32 cents lower.
The USDA’s supply and demand report estimated that corn-for-ethanol demand remained unchanged at 4.5 billion bushels.
“During the first five months of the year, ethanol production was about 12 percent lower than during the same time last year,” said Good. “Favorable blending margins, prospects for a slowdown in imports of Brazilian ethanol, and some improvement in ethanol production margins suggest that the pace of ethanol production will increase enough to at least reach the USDA projection of corn use.”
The U.S. feed and residual demand was listed at 4.45 billion bushels – only about 100 million bushels less than the previous year.
Livestock farmers who needed corn in mid-February paid about $7 per bushel, and at one elevator in west central Minnesota followed in this column, cash corn on Feb. 15 was $6.78 per bushel with a basis of 19 cents under. Compared with the price on Feb. 1, of $7.18, the price was 40 cents lower, but the basis had narrowed to 19 cents under.
Good said that the March 1 corn stocks, released on March 28, would provide a better estimate of feed and residual use for the year than the Jan. 1 corn stocks report.
“Due to the early harvest of the 2012 crop, use was likely understated for the final quarter of the 2011-12 marketing year, and overstated for the first quarter of the 2012-13 marketing year,” he said.
An additional 1.387 billion bushels are slated for food, seed, and industry use other than ethanol. The numbers suggest a new ending stocks number of 632 million bushels ahead of the 2013 U.S. harvest.
“The likely pace of corn consumption appears large enough to meet, or perhaps slightly exceed the USDA projection,” Good said, adding that the largest risk of lower prices comes from a growing confidence in larger U.S. corn crops in 2013.