Grains –
I found it interesting on Friday to consider soybeans and meal and to a lesser extent wheat have all “corrected” a bit off their Feb highs and are hugging support levels near key moving averages (though admittedly they’ve both found some life overnight). Corn futures, however, remain relatively unscathed having bounced back following the ethanol “news” from last week and downticks since have been few and far between thus far. It got me thinking that there must be some demand element I’m missing to this puzzle, because looking at solid weather developments (so far) in Brazil and Argentina point towards excellent crop potential there and likely strong headwinds against US exports this summer/fall and beyond. So this morning let’s do a quick rundown of some key demand figures in corn.
We’ll start with ethanol because that is obviously a major topic of conversation right now. Ethanol demand has obviously been very robust this year, aided largely by increased export demand. As you can see from the chart, this year’s ethanol production has followed basically the same pattern as we saw last year, but from a slightly higher base. Based on the expectation for a continued higher export base, it would stand to reason this similar pattern would continue going forward. Last year the Mar-Aug monthly corn grind averaged roughly 434 mil bu and to meet this year’s WASDE projection this year we need to average roughly 430 mil bu. That might argue that WASDE remains a bit too small on their projection, but probably not by a dramatic level. The orange line on the chart shows what we’d need to average to meet a 5,400 mil bu pace. Is a 50 mil bu difference a big deal to the corn balance sheet?
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