The Renewable Fuels Association's vice president of Research and Analysis, Geoff Cooper, offered his views of Friday morning's World Agricultural Supply and Demand Estimates. According to Cooper, the report will ease some of the tension in the world corn market, as the report showed that the corn supply and carry-out are generally expected to be larger than most market participants were anticipating. The trade expected corn carry-out to be 80 million bushels less than reported. It remained unchanged.
Corn used to produce ethanol in 2010-11 was raised 50 million bushels to 5 billion. According to USDA, strong blender incentives and positive ethanol producer margins continue to encourage expansion in ethanol production and use. Rising gasoline prices have pulled ethanol prices higher helping to offset increases in corn feedstock costs for ethanol producers. Cooper says RFA continues to believe USDA is using an overly conservative ethanol yield assumption of 2.7 gallons/bushel, meaning USDA is anticipating ethanol production of 13.5 billion gallons in the 2010-11 marketing year.
RFA's CEO and President Bob Dinneen noted that global corn production is looking stronger than many were expecting. In particular, production in South America and Africa has been robust. Farmers in countries like Uganda are responding to higher world prices by increasing production through the use of better technology and improved farming practices. Higher prices are allowing farmers in sub-Saharan Africa and other regions to participate in the world market and likely many of them are earning a profit on their crops for the first time in years.
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