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Corn futures spike on USDA report

09 Jun 2011 17:44 (+01:00 GMT)

Houston, 9 June (Argus) — Corn futures on the Chicago Board of Trade rose to their highest price level on record early today on news that the US Department of Agriculture (USDA) had slashed its estimate for 2011-12 ending corn stocks by 205mn bushels to 695mn bushels.

July Cbot corn futures values surged early in the day, hitting a record-high level of 793.00c/bushel by mid-morning, or 29c above the prior day's close of 764.00c/bushel. The contract cooled off by midday to stand 18.4c above its opening value at 782.40c/bushel. Ethanol followed corn's strength, with any June in-tank transferred ethanol trading at 274.00c/USG in Chicago, or 7c above the prior day's high trade of 267.00c/USG.

The USDA maintained its expectation for volumes of US-produced corn that will be needed to make ethanol during the 2011-12 harvest, but lowered the amount of corn planted area, according to the World Agricultural Supply and Demand Estimates report released today.

US corn used to produce ethanol is projected to stay flat at 5.05bn bushels in the 2011-12 harvest, the agency said, while the 2011-12 corn planted area was reduced by 1.5mn acres to 90.7mn acres. Demand for corn feed was reduced by 100mn bushels to 5bn bushels, the USDA said.

“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,” according to the report.

Harvested area was revised down 1.9mn acres to 83.2mn acres, 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 said.

The department said output is projected at 13.2bn bushels. This is “down 305mn from last month, but still a record, and up 753mn from 2010-11,” according to the report.

According to Renewable Fuels Association (RFA) vice-president of research and analysis Geoff Cooper, it is too early in the season to accurately estimate acreage lost due to flooding or abandoned because of prevented planting.

“The 30 June Acreage Report will provide a much better picture of actual corn acreage,” Cooper said, adding that historical data has demonstrated July and August weather holds more importance in determining final yields than planting dates.

“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,” he said.

The RFA continues to protest the USDA's estimated ethanol yield per bushel, saying it has led to overestimation of the gross amount of corn used for ethanol. The USDA assumes one bushel yields 2.7 USG of ethanol, while the RFA claims average ethanol yields are at least 2.8 USG/bushel.

“Using USDA's ethanol yield assumption, 5.05bn bushels would generate 13.64bn USG of ethanol. But using the more realistic industry average of 2.8 USG/bushel, production of 13.64bn USG would require 4.87bn bushels,” Cooper said.

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