675 million bushels of corn may seem like a lot, but that is only an 18 day supply for the US grain market, and that is the reason corn prices pushed above $7 Wednesday on the CME. March corn did not close above that level, but settled at $6.98 per bushel following USDA’s February Supply and Demand report that indicated the ethanol industry was refining corn faster than previously thought.
Corn, beans and wheat prices have all been rising, but so has the price for ethanol. A year ago, ethanol was in the $1.70 per gallon range, but Wednesday closed at $2.457 per gallon, the highest it has been since the early summer price spike in 2008 when it exceeded $2.80 per gallon.
The result of the ethanol industry’s demand for corn tightens down the supply, says University of Missouri marketing specialist Melvin Brees. In his Crop Report Commentary Brees says USDA economists raised corn use by 70 million bushels and 50 million of that was added to ethanol refining. The 745 million bushel ending stocks were lowered to 675 million, and that is 5% of the expected use for the current marketing year. Actually it parallels the tight corn supply of the 1995-96 season and is the least stocks to use ratio in the past 50 years.
USDA also cut back its estimate of global corn stocks to a 54 day supply, which is the least in 37 years, and may continue to ratchet that down as the droughty Argentine yields are known. The global estimate is now 122.5 MMT, which is a continuation of the lower estimates for feed grain supplies around the world. Brees says the USDA raised its estimate of the price range for the 2010 corn crop to $5.05 to $5.75. While much higher prices for corn currently are being offered, market analysts say the bulk of corn was sold at lower levels, pulling down the overall season average, with little free supplies left to be marketed.
As corn prices continue to push higher, so will soybean prices, in an effort to keep pace with the spring race to buy acres. While the USDA did not change any of the soybean supply and demand projections, March soybeans closed 16.75 cents higher on the day and November beans close 19.5 cents higher, but did not push through the $14 mark for new crop beans. Since USDA retained its 140 million bushel estimate of the 2010 carryout, global soybean stocks held steady. Declines in the Argentine bean crop were offset by increases in the Brazilian bean crop. Currently, the season average for soybeans is estimated from $11.20 to $12.20