|
|
|
|
|
|
|
| USDA estimates corn acres higher than back in March |
|
|
|
The June 30 revised USDA acreage report was a negative surprise for trade. Corn plantings were revised to 92.28 million acres, up from the 92.18 million predicted in March, and larger than the USDA estimate of 90.7 million acres in the June supply and demand report.
This increase was the result of more double-cropping on corn, which was verified by a decrease in soybean acres. Soybean acres are now projected at 75.2 million compared to the 76.6 million in the March intentions report.
Quarterly stocks did not offer any support, either. Corn inventory on June 1 was reported at 3.67 billion bushels, 350 million more than expected. This was nearly 650 million fewer than last year, though. Soybean inventory on June 1 totaled 619 million bushels 30 million more than expected and 40 million more than June 1, 2010. These numbers indicate the United States is not using grain as fast as thought.
Global demand for U.S. ethanol continues to increase. Calendar year ethanol exports through April 2011 now total 321 million gallons. This compares to the 397 million for all of 2010. In fact, U.S. ethanol exports in April totaled 120 million gallons, more that the U.S. exported in all of 2009.
The disagreement over the benefits of biofuel manufacturing continues. A recent study conducted by the world’s leading economists shows just how great of an impact renewable fuel manufacturing has had on agriculture prices to buyers, especially on coarse grains such as corn.
According to the group, coarse grain values will increase 7 percent per year for at least the next five years. This may be most noticeable in the U.S., where 40 percent of the corn crop is used for ethanol manufacturing.
Others are quick to disagree with these data, and claim the benefits of renewable fuel production go deeper than offsetting oil demand. Secretary of Agriculture Tom Vilsack is one of these who is pointing out the alternative benefits of renewable fuel manufacturing.
The primary benefits are the jobs the industry creates, which Vilsack claims total in the hundreds of thousands. He states ethanol has become a “scapegoat” for the renewable fuel industry when it comes to subsidy reform.
The U.S. may soon see increased competition in the world market from cheaper feed wheat. Several countries have already increased their use of feed wheat, and the widening price spread between the two grains will favor wheat even more.
At the present time buyers can book feed wheat for roughly $100 per ton less than U.S. corn. Lower shipping costs further benefits wheat’s use, given the closer proximity of feed wheat than U.S. corn to most buyers.
It is not out of the question that we could see increased feeding of wheat in the U.S., either. Analysts predict 145 million bushels of wheat will make their way into the U.S. feed market this year. This compares to the 75 million bushels that were fed the previous year and the average yearly use of 50 million.
The record amount of wheat that was fed in the U.S. was in 1990, at 321 million bushels.
We are again hearing economists make predictions over what the world will need for acreage in future crop years. If grain use holds at current upward trends, the world will need to increase plantings by 10 million acres per year.
The question is where these acres will come from, as not all grain-producing countries are capable of expansion at this time. Some grain producers such as the U.S. are not able to increase plantings, even if they want to.
Karl Setzer is a Commodity Trading Advisor/Market Analyst at MaxYield Cooperative. His commentary and market analysis is available daily on radio, in newsprint and on the Internet at www.MaxYieldCooperative.com
The opinions and views in this commentary are solely those of Karl Setzer. Data used for this commentary was obtained from various sources believed to be accurate. This commentary is intended for informational purposes only and is not intended for developing specific commodity trading strategies. Any and all risk involved with commodity trading should be determined before establishing a futures position. |
| 7/6/2011 |
|
|
|
|
