The January Feed Outlook compiled by USDA’s Economic Research Service boosted yield projections by 2.4 bushels per acre, which in turn pushed expected corn production up slightly to 9 billion bushels.
That’s the good news. On the flip side, USDA economists lowered their estimated average corn price estimates by a nickel to a range between $2.15 and $2.55 per bushel, and are predicting a 1.2-million-acre reduction in harvested area.
Overall, total corn use was lowered 80 million bushels by USDA to 9.69 billion, due to reductions of 30 million bushels in domestic use and 50 million bushels in exports. Representing 23 percent of total corn use, are feed, seed and industrial uses projected at 22.25 billion bushels in 2003, up from 22.05 billion last year.
Credited with the increase is ethanol fuel, which is expected to jump nearly 26 percent over 2001-02 figures. Using monthly ethanol production numbers from the Department of Energy as its guide, the Economic Research Service estimates that corn used to make ethanol in September through November 2002 totaled 201 million bushels, an increase of 27 percent over the same period last year.
The upward trend in corn used for ethanol is expected to continue, with 2002-03 marketing year use projected at 900 million bushels. That’s more than 186 million bushels more than similar use in 2001-02.
“Many new ethanol plants have been built in recent months. Several oil companies have decided to use ethanol in their gasoline sold in California starting in January 2003 in line with the original MTBE ban which postponed to 2004 by the California governor,” the report says.
In the recent outlook report USDA economists increased ending stocks by 81 million bushels to 924 million bushels, the lowest level since 1996-97. These changes increased the stocks-to-use ratio nearly 1 percentage point to 9.5 percent.
While global production prospects declined, use forecasts dropped more, boosting expected ending stocks. China’s corn use for marketing years 2001-02 and 2002-03 were each reduced by 2 million tons. In addition, European Union corn consumption prospects declined 0.3 million tons because of reduced corn production.
USDA’s World Agricultural Outlook Board reduced its 2002-03 U.S. corn export forecast 1 million tons because of stronger-than expected competition. Corn exports are forecast at 1,850 million bushels and are below last year’s level. In the period between October 2002 and September 2003, U.S. corn exports are forecast to reach 48 million tons, which is a drop of 1 million tons over previous forecasts, but still a more than 1-million-ton increase compared with the previous year.
“Fierce competition in world markets, especially from China, has reduced U.S. trade prospects. China has recently been shipping corn at a strong pace, and this is expected to continue. The forecast of China’s corn exports increased 1 million tons this month to 11 million,” the report says.
China has not only increased its share of East Asian corn markets, but has even expanded shipments to South Asia and the Middle East. In addition, China’s government encourages corn exports by rebating value-added taxes and providing attractive rail rates to ports.
With increased production prospects this month, the export forecast for Brazil increased 0.3 million tons. However, the outlook for exports between October 2002 and September 2003 are still expected to decline more than 2 million tons compared with the previous year.
South Africa is expected to export 0.3 million tons less corn because of this month’s reduction in production prospects. USDA projects 2002-03 production will be reduced 1.5 million tons because dry planting conditions limited sown area, and the El Nino-influenced weather is expected to limit yields to average levels, not the trend levels implied by the yield growth of recent years. Despite the sharply reduced production prospects, exports will drop much less because South Africa can export white corn to its drought-stricken neighbors while increasing imports of yellow corn to feed to animals, the report says.
Forecast global corn imports are little changed this month, with small increases for South Africa and Columbia offset by reduced prospects for Venezuela.