USDA OUTLOOKS MEANS MORE CORN DEMAND NEEDED

Tricia Braid

Feb, 22, 2013  |  Today's News

In an agricultural outlook meeting held yesterday, U.S. Department of Agriculture Chief Economist Joe Glauber reported he expects to see a record corn crop in 2013. And with it, Glauber said, is an anticipated 33% reduction in corn prices, down to an average of $4.80 per bushel. IL Corn knows that securing increased demand is the way to deal with a growing supply. That’s why we’re working hard to find ways to expand marketplace opportunities for ethanol. 

The USDA forecast the U.S. corn crop at 14.250 billion bushels, up 35%. Corn plantings are projected at 96.5 million acres, down slightly from last year’s 75-year high, but still at an appreciably high level. With a return to trend-line yields and average weather conditions, it won’t surprise most people if those mountains of corn start appearing around the country side again.

“What we’re looking at the prospect of this Fall is a demand problem, for sure,” said Paul Taylor, a farmer from Esmond, IL, who currently serves as the President of the Illinois Corn Growers Association.

“In the short-term, we need to recover from the fact that we’ve really destroyed demand,” said Taylor, speaking of the price consequences to the market brought by the reduced yields in 2012 due to the heat and drought conditions.

“Ethanol plants have closed or idled, and our export customers found other suppliers, and the livestock industry responded by contracting. If we have a carryout back at what we might call ‘usual’ levels, we’re really going to be hurting on the corn price side of things,” Taylor added.

In his report, USDA’s Glauber said several factors are likely to hamper further growth in corn use for ethanol including the overall decline in U.S. gasoline consumption and weak export prospects because of increased competition from Brazil and potential restrictions on shipments to the 27-country European Union.

“Compounding the corn demand issue is that the liquid fuel market continues to contract,” Taylor said. “With fewer gallons of gasoline being consumed in this country, our 10% ethanol content is getting less each year, further shrinking the ethanol market for corn farmers.”

“The E-10 blend wall is more like an E-10 blend impassable mountain at this point,” Taylor added. “That’s why it’s so important that we work to expand markets for ethanol, especially in supporting the move to E-15.”

“Without expanded ethanol markets, I’m not really sure where all this corn will go. Illinois corn farmers need to stay alert for the appropriate time to contact their state representatives to support legislation that will level the playing field for E-15 in the Illinois marketplace. It’s an uphill battle, as Big Oil sees every gallon that goes to ethanol as a hit to their already record profits.”