WASDE: Corn use for ethanol increases

By Susanne Retka Schill | March 05, 2009
Web exclusive posted March 11, 2009, at 4:50 p.m. CST

In the March 11 World Agricultural Supply and Demand Estimates report, the USDA lowered its projection for corn ending stocks in the current marketing year due to an increase in ethanol use. The USDA projected 2008-'09 ending stocks will be 50 million bushels lower as corn use for ethanol was projected 100 million bushels higher, more than offsetting a reduction in projected exports from the previous month's report. Corn exports were projected 50 million bushels lower as a result of sales and shipments to date, and pressure from increased foreign supplies of corn and wheat.

Corn ethanol use was projected higher as blender margins have become increasingly favorable since late February as gasoline prices rose relative to ethanol. A continuing recovery in weekly production of gasoline blends with ethanol was also supportive of ethanol demand for corn, as were the latest numbers on ethanol production, imports and stocks, which indicated record use in December.

WASDE boosted its projections for the 2008-09 season-average farm price for corn to $3.90 to $4.30 per bushel compared with $3.65 to $4.15 the previous month. Continued strength in prices received by producers indicated higher-than-expected forward contracting, the USDA reported, as farmers took advantage of pricing opportunities last spring and summer.

Global coarse grain output for 2008-09 was nearly unchanged with higher corn production offset by lower sorghum and barley production. Global coarse grain supplies for 2008-09 were raised 2.2 million tons mostly reflecting upward revisions to 2007-08 corn production and carryout in Argentina and Mexico, and lower 2007-08 corn feeding in South Africa.

World corn production for 2008-09 was raised 0.6 million tons as an increase for South Africa more than offset downward post-harvest revisions for India and Kenya. South Africa production was projected 1.5 million tons higher this month at 12 million. India corn production was reduced 0.5 million tons on lower harvested area and yields. Kenya production was reduced 0.4 million tons on lower yields.

Global sorghum production for 2008-09 was lowered 0.5 million tons with a reduction for Argentina partly offset by an increase for India. Argentina sorghum production was lowered 1.3 million tons with lower projected harvested area and yields. Early season drought that continued in southern growing areas through February increased expected abandonment and reduced yield prospects for this year's crop. Sorghum production in India was raised 0.7 million tons on higher reported yields.

World corn imports, exports, and consumption for 2008-09 were all projected lower this month. Imports were lowered 0.5 million tons each for Malaysia and Taiwan. Partly offsetting was a 0.5-million-ton increase for Kenya imports. Lower expected corn exports for the United States are only partly offset by small increases for India and Russia. Global corn consumption was lowered with reductions in expected feeding and food, seed and industrial use.

Feed use was lowered 2.2 million tons with reductions for China, Taiwan, Malaysia and South Africa. Food, seed, and industrial use was also lowered
2.2 million tons with a 5-million-ton reduction for China and a 0.6-million-ton reduction for India more than offsetting increases for the United States, South Africa and the Philippines. Government procurement policies in China are expected to reduce industrial corn use, including ethanol, and boost stocks.

Global corn ending stocks were projected 8 million tons higher with the largest increase for China where stocks are projected 6.0 million tons higher. Increases were also projected for South Africa, Argentina, and Mexico.