Grain and Energy Outlook
CattleFax calls for corn increases in amount planted and price.
by Kasey Miller for Angus Productions Inc.
NASHVILLE, Tenn. (Feb. 3, 2012) — As with the markets in almost every sector, there is continued volatility in the grain and energy markets, Mike Murphy of CattleFax told audience members at the CattleFax Outlook session of the 2012 Cattle Industry Convention and NCBA Trade Show in Nashville, Tenn., Feb. 3.
With higher demand for corn because of ethanol production, corn prices have skyrocketed, and supply levels can’t seem to keep up, especially with low stocks-to-use levels. The 2011-2012 corn carryover is expected to stay historically low, which means that a record corn crop in 2012 is needed. He said that 2012-2013 stocks-to-use levels have the potential to climb above the historically low levels from the past 12 months, potentially rising to the 8%-11% range.
“For the first half of 2012, spot corn futures prices are expected to remain historically high amid low stocks-to-use levels,” Murphy said, “meeting resistance from $6.50 to $6.75 a bushel and finding support from $5.50 to $5.75.”
Soybeans and wheat commodities are intertwined, said Murphy, and there is a slight relief in price. Comfortable supplies have dropped price levels in both crops, driving more producers to switch to corn production. Murphy projected that in 2012, U.S. corn production would use 93.9 million acres, up from 91.9 in 2011; soybean production would drop from 75 to 74.5 million acres; and wheat would increase from 54.4 to 57.2 million acres.
“We will see more wheat being fed, which should stabilize the corn supply,” Murphy predicted.
Corn used for ethanol production is supported by growing exports, though E15 hasn’t hit the marketplace. Of the principal corn-exporting countries, the United States is projected to have 44% of the global exports of corn in the 2011-2012 marketing year. Historically the United States is responsible for 52%-63%. Argentina follows in exports with 19%, the Ukraine with 13%, Brazil with 9% and other countries at 15%. Argentina and Ukraine have both had record-large corn crops, which will support record-large global exports.
He said that global oil demand is expected to be at record levels in 2012, despite waning U.S. demand. However, fuel markets are more global, making the United States a smaller piece of the global economy. This means that our high fuel exports have offset declining domestic prices and will lead to seasonally high and rising gasoline prices.
Murphy asserted that ethanol is finding a home in global energy markets. Ethanol will use an estimated 5.2 billion bushels of U.S. corn in 2012, and almost 300 million bushels will be used in ethanol exports.
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