In preparation for some grain market and bioenergy-related presentations for next week’s KSU Risk and Profit Conference in Manhattan, I am working on some graphics illustrating trends in U.S. corn usage with details on bioenergy-related DDGSs feed and export use.
This first graphic runs from the 1989/90 to the USDA July projection of the 2012-13 marketing year. After Friday’s USDA WASDE report, both the projected production number (now at 12.970 billion bushels) and the usage numbers for “new crop” MY 2012/13 will drop markedly. One independent grain market advisory group came out today with a forecast of below 10 billion bushels today. I dont know that the USDA will project a figure that low in the August NASS Crop Production report, but something at least at or below 12 billion bushels seems likely.
The big question in the markets now has to do with usage rationing in general, and how ethanol usage will fare relative to livestock feeding and exports. This graphic shows that when you “back out” the distiller’s grain production from ethanol usage since MY 2008/09, total corn plus corn equivalents (pounds of DDGS converted to bushels of corn at 56 lbs per bushel) has been consistently near 6 billion bushels. Now the situation in the market this year will stress this number, likely forcing it downward (but where to – 4.0 to 4.5 billion bushels of corn plus corn equivalents?). It just seems this year we are going to have to see and react to what the market provides us in term of limited corn supplies at record high prices. But if I can hypothesize a bit, it is likely that the usage side may show enough weakness at record high prices to provide its own upside price barrier – limiting usage for all but the most inflexible – inelastic – hard demand driven users.