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2011 Crop Prospects - Corn

Despite an anticipated 4% rise in planted acreage, the corn market will remain tight in 2011-12. Assuming harvested acreage of 84.9 million acres and a trend yield of 161.7 bushels per acre, USDA forecasts for 2011-12 corn production at a record 13.73 billion bushels.

"Because of this year's smaller carryout, total supply for 2011-12 is estimated at 14.425 billion bushels, up only 250 million bushels over 2010-11 levels," Joe Glauber, USDA's chief economist told more than 2,000 participants attending USDA's annual Outlook Forum Thursday morning.

Feed use to fall, exports and ethanol to rise

USDA projects total corn use at 13.56 billion bushels. Higher exports and higher corn use for ethanol will more than offset an anticipated reduction in feed use. Feed and residual use is anticipated to fall slightly in 2011-12 as high feed costs limit expansion in the pork and poultry sectors and beef feeding declines with tighter feeder cattle supplies.

Exports, however, are anticipated to rise to 2 billion bushels as reduced global use of feed quality wheat boosts world corn trade and consumption.

Corn use for ethanol continues to grow. Weekly ethanol production numbers suggest that ethanol production is currently running over 13.5 billion gallons on an annualized basis. "This far exceeds levels implied by the mandated levels under the Renewable Fuel Standard (12.6 billion gallons in 2011)," says Glauber. "On average, production margins for ethanol producers remain positive as many plants appear to have forward-priced their corn requirements below the recent market highs.

"Incentives for ethanol blending remains strong with the Volumetric Ethanol Excise Tax Credit in place through 2011 and ethanol expected to remain attractively priced relative to gasoline. As a result, corn use for ethanol is expected to grow further in 2011-12 to a record 5.0 billion bushels," he adds. "At this level, corn use for ethanol would account for 37% of total use and 36% of corn production."

Corn prices are forecast at a record $5.60 per bushel, $0.20 higher than the mid-point of the range forecast for 2010-11.

Stock rebuilding surge unlikely

With total supply at 14.425 billion bushels and total use at 13.56 billion bushels, ending stocks are projected at 865 million bushels in 2011-12, a modest 190-million bushel gain over the level projected for 2010-11 levels. Stocks-to-use levels will remain tight at 6.4%.

"Higher than trend yields or larger planted area could help rebuild corn stocks," notes Glauber. "But stock levels are not likely to return to recent levels over the course of one or even two seasons. For example, if 2011-12 yields were to equal the record level of 164.7 bushels per acre achieved in 2009-10, ending stocks would exceed 1.1 billion bushels. And this assumes no increase in use for feeding, ethanol, or exports, an unlikely scenario. Further, assuming this yield and no increase in usage, 2011 planted area would have to rise 8 million acres to return stocks to the 2010-11 level of 1.7 billion bushels."