Market changes in sorghum affect corn use for ethanol projections

By Susanne Retka Schill | November 10, 2015

USDA raised its forecasts for corn and sorghum production in its Nov. 10 supply-demand report, making adjustments to its projections for ethanol use of both grains, due to changes in the sorghum outlook.

Corn production is forecast 99 million bushels higher with the national average yield raised 1.3 bushels per acre to 169.3 bushels, just 1.7 bushels below last year’s record.  Projected domestic corn use for 2015-’16 is lowered 50 million bushels as a 25-million-bushel increase in expected feed and residual use, with the larger crop and lower expected prices, is more than offset by a 75-million-bushel reduction in  corn used to produce ethanol.  The reduced outlook for corn use for ethanol  is driven by significant adjustments to the 2015-’16 sorghum balance sheet this month. 

U.S. sorghum exports for 2015-’16 are projected 105 million bushels lower.  Declining premiums for sorghum offered by exporters and large price discounts for sorghum relative to corn in interior cash markets drive expectations for higher use in ethanol production and higher feed and residual use.

Total U.S. corn use for 2015-’16 is projected 100 million bushels lower with exports lowered 50 million bushels.  U.S. corn export sales and shipments lag well behind last year at this time and U.S. supplies remain uncompetitive in many foreign markets as corn from Brazil continues to undercut U.S. offerings. 

U.S. corn ending stocks for 2015-’16 are projected 199 million bushels higher at 1.76 billion.  End-of-year stocks are projected 29 million bushels higher than those reported for 2014-’15.  The 2015-’16 season-average corn price received by producers is projected 15 cents lower on both ends this month to $3.35 to $3.95 per bushel.  

This month’s sharp rise in 2015-’16 global coarse  grain supplies is driven mostly by downward revisions to China corn feeding for 2013-’14 through 2015-’16.  China corn beginning stocks are raised 18.8 million tons for 2015-’16 reflecting the impact of lower estimated feed use for the preceding marketing years. Partly offsetting the increase in China is a 7-million-ton reduction for 2015-’16 Brazil corn beginning stocks.  Brazil corn feeding is raised for 2006-’07 through 2011-’12.  (Balance sheet revisions for China and Brazil with a comparison to the October estimates and projections are available here.)  

Global coarse grain production for 2015-’16 is raised 2.3 million tons with the largest increase for U.S. corn.  Corn production is also increased for Argentina and Brazil, but lowered for Ukraine, South Africa, India and EU.  Global sorghum production is lowered slightly with a reduction for Mexico more than offsetting the U.S. increase. 

Global 2015-’16 coarse grain consumption is lowered 10.0 million tons mostly reflecting reductions in China corn and sorghum feeding.  Corn consumption is also lowered for EU with reductions in food, seed, and industrial (FSI) use and feed and residual use, with the latter driven by higher expected wheat feeding.  China FSI use is raised on prospects for more corn processing. 

Global coarse grain trade for 2015-’16 is lowered with corn and sorghum exports both reduced. Corn exports are lowered for Ukraine and India, but raised for Argentina.  Brazil corn exports are raised for 2014-’15, also affecting U.S. 2015-’16 marketing year export prospects. 

Lower world sorghum exports for 2015-’16 reflect this month’s change for the United States. Sorghum imports are lowered for China with only a small and partly offsetting increase made for Mexico.  

Global coarse grain ending stocks for 2015-’16 are raised 24.3 million tons with nearly all of the increase for China corn.  More than half of the world’s 2015-’16 corn ending stocks are expected to be held in China.  Corn ending stocks outside China are projected 0.3 million tons higher this month.  Higher U.S. and EU corn ending stocks are offset by reductions for Brazil and Indonesia.