WASDE. USDA made no changes to the U.S. corn supply and demand balance sheet in the December World Agricultural Supply and Demand Estimates. The ending stocks number of 647 million bushels was just below the average trade guess of 663 million, in a range from 493 to 752.
World corn production was increased 9.39 mmt (370 million bushels), due primarily to higher area and yield numbers in China. Corn yields in China are a record 5.96 tons/hectare (about 95 bushels per acre), up 4 percent from last year. China accounted for 8 of the 9 mmt ton increase in world production.
Offsetting the increase in world corn production was an increase in world corn use. Total consumption increased 8.73 mmt, 7.2 mmt of which was feed. That and a revised lower estimate of beginning stocks (-1.04 mmt) reduced world corn ending stocks by 0.38 mmt. Measured in days of use on hand at the end of the marketing year, the world corn situation tightened from a 50.44 day supply in November to a 49.77 day supply in December. The 20-year average for this number is an 83 day supply, the 10-year average a 62 day supply.
Corn Use. In addition to the weekly corn export numbers, another report was released this week related to corn for fuel. The Energy Information Agency updated its Short Term Energy Outlook reporting monthly ethanol use.
The week of November 29th showed continued slow corn export sales with only 2.03 million bushels sold. The marketing year average is 7.3 million bushels per week with a pace of 17.14 million bushels needed to reach USDA’s target of 1.150 billion bushels.
Total ethanol consumption in November was 1,130 million gallons, down 145 million from last month and down 47 million from last year. Year to date, ethanol use is up 95 million gallons compared to 2011, just under a 1 percent increase.
Ethanol stocks are on the rise. According to today’s Weekly Petroleum Status Report, ethanol stocks on December 7th were 841 million gallons, up 29 million gallons from last week and up 125 million gallons over last year.
Outside Markets. While the cloud of uncertainty related to mandated spending cuts and tax increases at the end of the year continues to hang over the market, the November employment report contained positive information. The addition of 146,000 jobs was above expectations of around +100,000 and showed relatively strong employment in face of the fiscal cliff. According to analysis by IHS Global:
“The good news is not that the labor market is improving rapidly—it is not—but that employment growth is holding up despite all the fears about the fiscal cliff. This suggests that if we can successfully negotiate the cliff without a prolonged crisis and without too much fiscal tightening up front (far from a sure thing, admittedly), employment growth should accelerate in 2013.”
The Federal Reserve released today the guidelines it will use to provide or remove stimulus to the U.S. economy. Rather than provide a timeline for monetary policy initiatives, so called date-based guidance, the Fed provided bench mark numbers: interest rates will stay low until employment reaches 6.5% or inflation looks to be higher than 2.5%.
2013 Corn Marketing Plan. I have priced 20 percent of the 2013 crop on this year’s price strength. With expanded acreage in South America, favorable weather outlook, and the likelihood of strong plantings in the U.S. next spring, I see more downside price risk than upside potential at this time. If I’m right and prices work lower next season, I’ll be glad to have locked in at least a portion of sales this early. If I’m wrong and prices move higher, my average price for the year will go up.