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AFBF: Dramatic drop seen in corn used for ethanolThe U.S. Department of Agriculture's World Agricultural Supply and Demand Estimates released Dec. 11 places corn used for ethanol production at 3.7 billion bushels, down 300 million bushels from the November estimate. "The most dramatic change in the December WASDE report was the big drop in corn used for ethanol production," said Terry Francl, senior crops economist with the American Farm Bureau Federation. "I am surprised that corn use for ethanol dropped by that much. Demand for ethanol is down, just like demand for gasoline is down, but I just don't think the decline is that large. I believe 3.8 billion bushels to 3.9 billion bushels is closer to the mark." Francl explained that a number of ethanol plants are idled due to weak demand, which explains the drop in corn used for ethanol. However, the Renewable Fuel Standards would seem to imply that at least 3.8 billion bushels of corn will be utilized for ethanol production in 2008-2009. The December WASDE report also showed a 100- million bushel drop in exports from November, to 1.8 billion bushels. "The drop in corn exports is more on target due to the weakening global economy," Francl said. The AFBF economist expects a further weakening in corn exports in 2009 due to the economic slowdown. The drop in exports and ethanol usage in the December report puts U.S. corn carryover supplies at 1.474 billion bushels, up 350 million bushels from the November report. "From a fundamental perspective this report will put a clear bearish tone on the corn market," Francl explained. However, other factors such as crude oil prices and the value of the dollar may be offsetting. USDA forecasts the average farm price for corn at $3.65 to $4.35 per bushel in the December report, down from $4 to $4.80 in the November report. Francl said there will likely be some recovery in prices next year when corn must compete against soybeans for acreage once again. Corn prices track oil prices and there must first be a recovery in oil prices for corn prices to improve. "Most farmers, if they have access to storage, will wait for the market to come back before they sell, sometime in the spring or the summer," Francl explained. To access the WASDE report, http://www.usda.gov/oce/commodity/wasde/. 12/22/08 Date: 12/16/08 Advertisement
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