Strong Ethanol And Feed Usage, But Stocks Are Up On Bigger Crop

Market Analysis

The corn market’s attention will be split on March 29 between the USDA’s quarterly stocks report and 2018’s planting intentions which will be released at the same time. After a record US corn yield produced record sup-plies last fall, America’s ethanol corn demand has been on a record average weekly pace during the first six months of 2017/18 crop year. Conversely, overseas demand was lackluster during the final four months of 2017 before a dramatic jump in foreign corn purchases has occurred since Argentina’s drought has intensified in 2018. This quarter’s corn stock level will also be closely watched to see if this year’s feed demand will need to be increased from its current 5.55 billion bu. outlook.

After an impressive 3.5% yearly gain in US ethanol corn usage last fall, US ethanol output continued its record pace with 2.5% rise during the past winter quarter prompting the USDA to up its biofuel demand earlier this month. US export shipments during the Dec-Feb period were up 100 million bu. from the fall. However, the big news has been the past 9-week explosion in export sales by 650 million bu. as foreign buyers reacted to Argentina’s drought cutting its output by 10 mmt since Jan 1.

To calculate U.S. feed usage, the USDA needs to survey both elevator & farmer inventories each quarter. This process is the only way to quantify the amount of domestic feed usage since corn is fed both on and off-the-farm.

This year‘s US animal numbers are up with US cattle feedlots staying at 8% higher during this past winter quarter. This year’s Southern Plains drought forcing feeder cattle into the feedlots because of lack of grazing was the reason. Broiler and hog weekly slaughter have been 1.5% to 2.5% higher during much of past quarter, too. The central US winter hasn’t been harsh, but a 3.4% rise in feed demand to 1.58 billion bu. is expected to result in 8.75 billion bu. quarterly corn stock on March 29.