Today was a busy day for ethanol and grain market data junkies. First, USDA released its June supply-demand estimates, which showed a downward revision to 2011 planted and harvested corn acres. Second, government data on April exports of ethanol and distillers grains was released, showing another record month of ethanol exports and huge shipments to Brazil.
USDA's June WASDE report lowered 2011 corn planted area by 1.5 million acres from March intentions to 90.7 million acres. According to USDA, "Planting delays through early June in the eastern Corn Belt and northern Plains are expected to reduce planted area, more than offsetting likely gains in the western Corn Belt and central Plains where planting was ahead of normal by mid-May." Harvested area was lowered 1.9 million acres, to 83.2 million with the additional 400,000-acre reduction "reflecting early information about May flooding in the lower Ohio and Mississippi River valleys and June flooding along the Missouri River valley."
USDA's yield estimate, which is based on a long-term trend and adjusted for late planting dates was unchanged at 158.7 bu/acre. Total corn production is projected at 13.2 billion bushels, down 305 million from last month, but still a record, and up 753 million from 2010/11. On the demand side, USDA reduced corn feed use by 100 million bushels to an even 5 billion bushels. Ethanol demand and export demand were unchanged at 5.05 bbu. and 1.8 bbu., respectively.
Here are some key points to keep in mind:
- The U.S. corn crop is now fully planted, for all intents and purposes. Warm, dry weather over the past few days has allowed Indiana, Ohio, and Michigan to finish up, joining other top corn states that finished planting last week. The early heat has helped emergence, which is not far behind normal.
- It likely is too early to accurately estimate how many acres may have been lost to flooding or abandoned due to prevented planting. The June 30 Acreage Report will provide a much better picture of actual corn acreage.
- It is extremely early in the season and much will change between now and harvest. Historical data has shown that the weather in July and August is a much more important factor in determining final yields than the planting date. The 2009 season is a good example. The 2009 planting pace was much slower than normal and similar to this year. Yet, the season ended with a record average yield of 164.7 bushels/acre. Conversely, 2010 saw one of the fastest planting paces on record, yet final average yields were much lower than expected because of extreme heat and dryness in August.
- One-third of the corn going to "ethanol and by-products" returns to the livestock market in the form of distiller grains, corn gluten feed and meal. That means total livestock feed use is closer to the equivalent of 6.6 billion bushels of corn on a net basis, and ethanol use is closer to 3.4 billion bushels—or 26% of total use.
- USDA is underestimating ethanol yield per bushel, which leads to overestimation of gross bushels used for ethanol. USDA reportedly assumes one bushel yields 2.7 gallons of ethanol, while actual average ethanol yields have been 2.8 gallons per bushel or higher. Using USDA's ethanol yield assumption, 5.05 billion bushels would generate 13.64 billion gallons of ethanol. But using the more realistic industry average of 2.8 gal. bu., production of 13.64 billion gallons would require 4.87 billion bushels.
