Feed Consumption Cutbacks
Corn prices stabilized until feed, industrial use determined
Prices of both corn and soybeans should be well supported until rationing has been confirmed. For corn, considerable uncertainty about the pace of feed and industrial use will persist until the stocks estimate is made available in the second week of January, says Darrel Good, ag economist at the University of Illinois.
"It’s unlikely that the pace of feeding has been reduced to the level forecast by USDA," Good says. Consumption in that category is forecast at 4.15 billion bushels. That’s 412 million below the official estimate for the 2011/12 marketing year. However, Good says, that figure is probably understated due to the availability of larger than normal quantities of new crop corn this year. As a result, it’s possible that USDA’s rationing number may be difficult to reach in the short term.
Furthermore, USDA’s figure for corn acres harvested was high in the October Crop Production report, which forecast corn harvested for grain at 87.721 million acres, just 9.225 million less than acreage planted for all purposes.
While the difference, mostly due to silage production, is above the five-year average, it is less than the 9.467 million acres in the comparable drought year of 1988 and the 11.082 million acres in 1980.
Expectations Exhausted. "Widespread reports of corn abandoned or harvested for silage this year left expectations for the difference between acreage planted and harvested for grain to be larger than the current forecast," Good explains.
The positive response to what appeared to be neutral to negative production forecasts suggests that the market priced-in the risk of even larger production forecasts. Additionally, USDA’s forecast for expected year-end stocks of both corn and soybeans are near pipeline levels.
This is smaller than anticipated in the case of corn; however, the projection is larger than anticipated for soybeans, increased by 150 million bushels.
"Some interpret the increase as a reflection of stronger demand than had been previously forecast," Good says.