While USDA won’t provide a final estimate of the U.S. corn crop until the January report (after having reviewed the grain stocks numbers), by now we pretty much know how much corn was harvested this fall. Any changes will likely be small and unlikely to alter the overall supply picture.
Now the job of the market is to figure out whether current price levels are sufficient to ration out available supplies and force demand cutbacks if necessary. Of the three main demand components – feed, ethanol and exports, we have good monthly visibility of only the latter two.
Feed demand is pretty much an unknown/unknowable factor and it is derived as a residual. Basically we know how much was fed to livestock and poultry after taking an inventory of grain stocks and deducting how much corn went to industrial use or was shipped outside of the country.
So far, the data on exports and ethanol appears to indicate that the surge in corn prices has had the intended effect. Corn exports are down sharply and ethanol production has slowed down considerably compared to a year ago.
The chart depicts the progress in U.S. corn shipments this year compared to both year-ago levels and the trend projected by USDA in its November update.
Weekly corn exports slowed down considerably in October and November. In the last eight reported weeks, weekly corn exports have averaged about 13.5 million bu./week, compared to 32.1 million bu./week averaged during the same period a year ago, a 58% decline.
The current trend in U.S. corn export shipments implies that for 2012-13 total corn exports could dip below the 1-billion-bu. mark. Some analysts already expect USDA to revise the export number in the December report, implying more corn going into feed. Increased availability of feed from other parts of the world clearly has had an impact. Even shipments within North America are down sharply. While Canada is a relatively small market for U.S. corn, Mexico is the No. 2 destination, accounting for about 26% of U.S. corn shipments in 2011-12.
U.S. corn shipments to Mexico in the last marketing year amounted to almost 400 million bu. But significant liquidation of the beef cowherd and reductions in cattle feeding have limited Mexican demand for U.S. corn.
In addition, sharply higher meat protein prices in Mexico have further rationed out demand for pork and chicken, forcing cutbacks in overall feed demand. So far this marketing year, U.S. corn exports to Mexico are down around 38 million bu., or 46% from last year.
Ethanol exports, which constitute another way to ship corn to other markets, also have slowed significantly. In 2011-12, the U.S. shipped the equivalent of 400 million bu. of corn in the form of ethanol exports. This marketing year, ethanol exports (in corn bu. equivalent) could be down between 100-150 million bu.
