UIUC Weekly Outlook: Rationing 2011 Corn Crop

According to Good, the use of corn for ethanol and co-product production during the current year is forecast by the USDA at 5 billion bushels, 21 million less than used last year. Use during the first half of the year was estimated to be 81 million larger than use of a year ago. To reach the projection for the year, use during the last half of the year needs to be 4.1 percent less than that of a year ago. For the 5-week period ended on April 6, 2012, ethanol production was estimated to be 1.5 percent less than in the same period last year. While the pace of ethanol production has slowed, it is above that needed to reach the projected level of corn use for the year.

"While futures prices have declined over the past week, basis levels remain generally strong and the May/July futures inversion has increased," Good said. "These relationships suggest on-going tightness in stocks and/or a slow rate of movement relative to the pace of consumption. While evidence about the pace of consumption is mixed, expect corn prices to remain under pressure until there is convincing evidence that the necessary rationing has not occurred or concerns about 2012 production develop," he said.