March 14, 2011

US corn for ethanol remains as wild card

One of the main concerns of corn end users is the amount of US corn that will be used to produce ethanol in 2011 and beyond.

On March 4, May corn ended at US$7.28 per bushel, lower than the highest by 14 cents, but an increase of almost 5 cents from the day's lowest.

Al Kluis, commodity advisor and broker, and president of Kluis Commodities, said that the US Congress is predicted to slash local expenditure, which could include ethanol subsidies.

"The perception is that agriculture is doing pretty well right now, and some of these ethanol cuts could be made without damaging the outlook for the farm economy," Kluis said.

The 2010 growing season corn crop end stocks were forecasted at 675 million bushels ahead of the March 10 World Agricultural Supply and Demand Estimates report. The 675 million bushels matches the 1995 crop stocks-to-use ratio of 5%.

"I don't think the government is going to come in and say, 'We can't let corn reserves get any lower.' What they have said so far is, 'The market has to do its job.' It's a matter of who stops using corn. Is it dairy farmers, ethanol or exports? I don't see the government making any concerted effort to stop corn usage," Kluis said. "I think they are trying to save money by cutting ethanol subsidies and eventually, when prices get high enough, the marketplace is what will begin to cut demand."