URBANA, Ill. — The price of corn is under pressure. That’s no surprise during the harvest season but, as Todd Gleason reports, end users will need to pick up the pace if real support is to be found.
The recent weakening of ethanol production levels, says University of Illinois agricultural economist Todd Hubbs, and a report of lower net export sales isn’t a good a sign for the price of corn. Neither, he says is the narrowing ethanol plant profit margins.
Hubbs: While it is still strong, it has pulled back from the torrid pace of earlier this year.
The Illinois number cruncher says to meet the current USDA projection, an expansion in gasoline consumption or a continuation of the growth in ethanol export levels, like witnessed during the 2017-18 marketing year, is necessary. EIA projections from the most recent Short-Term Energy Outlook place 2019 ethanol production at 1.03 million barrels per day. That’s down from the current estimate of 1.05 million barrels a day in 2018.
Hubbs: While we’ve seen a pullback in ethanol use for corn, it is still at a good level. But it has been a pullback. Corn exports have been very strong despite the negative net export sales last week.
Outstanding sales are up 27% over this same year last year. Ethanol exports witnessed record levels in the 2017-18 marketing year with total exports equaling almost 1.62 billion gallons. Nearly 30 percent of this record total went to Brazil. Recent reports out of Brazil show ethanol stocks up 29 percent over last year as sugarcane processing turned back to ethanol production. The prospect of eclipsing last year’s record export total requires continued Brazilian sourcing of U.S. ethanol or increased ethanol exports to other markets. Corn used for ethanol in 2018-19 appears more likely to be closer to the 2017-18 total of 5.601 billion bushels says Hubbs rather than the current USDA projection under current market scenarios.
The current WASDE forecast places ending stocks at 1.813 billion bushels for the 2018-19 marketing year. A continuation of strong demand, but possibly at lower levels than the current USDA projections, hold promise for post-harvest prices. Still Hubbs thinks corn prices may struggle to find strong support over the near-term without a significant change in the supply outlook.
— Todd Hubbs, Agricultural Economist – University of Illinois
Todd E. Gleason, Farm Broadcaster
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