More comfortable corn carryout-to-use ratio projected

The following corn market analysis was written for Ethanol Producer Magazine in late December. Author's commentary reflects prices and market conditions at that time.   

The grains complex has been tiresome compared to the whirlwind proteins of late. A big carryout looms in corn, and demand from China has been in question.  Nonetheless, the lack of cash movement led to historically strong harvest basis when considering production nears 14.0 billion bushels and a carryout of 1.792 billion bushels.

The December USDA report increased corn for exports and ethanol production by 50 million bushels each. Corn for exports is projected at 1.450 billion bushels compared to 731 million a year ago. Ethanol demand is projected at 4.950 billion bushels as compared to 4.648 billion a year ago. Feed demand is still expected at 5.20 billion bushels, up 867 million from a year ago. Therefore, feed and ethanol coproduct demand is expected to increase, all the while animal  grain consuming units are not increasing at the same rate. Thus domestic meat production should increase and/or more coproduct should be exported through the remainder of the marketing year. The end corn carryout-to-use ratio should be 13.7 percent versus 7.4 percent a year ago. The accompanying chart illustrates that with high-dollar corn, the market was able to find other feedstuffs, but is the number this year too high, too fast?  Any demand reduction will see carryout increase, weighing heavily on the market.  

World corn carryout rests comfortably at 196.62 million metric tons (mmt). This compares to 164.41 mmt and 165.19 mmt the last two years, respectively. Demand will be influenced by China’s handling of genetically modified corn and corn products and South America production, which had favorable December weather.