What is in this article?:
- Corn, soybean prices struggle
- Ethanol uncertainty continues
• Although futures prices for corn remain in a relatively narrow range, basis levels generally remain quite strong and at record levels for this time of year in some markets.
• In contrast, soybean basis remains near typical levels and spreads are generally large.
Ethanol uncertainty continues
“While uncertainty persists about ethanol demand and production without the blenders’ tax credit in 2012, the current pace of production supports the USDA projection of 5 billion bushels of corn used for ethanol this year,” he said.
Ethanol exports, particularly to Brazil, are a major part of the current increase in ethanol production. Those exports are vulnerable in the longer term if world sugar production rebounds and sugar prices moderate.
“The USDA still expects U.S. corn exports during the current marketing to be at a nine-year low of 1.6 billion bushels. Exports have been less than 1.6 billion bushels only six times in the past 36 years. Through Nov. 10, the pace of weekly export inspections continued to run well below the average pace needed to reach the USDA projection,” he said.
The Census Bureau corn export estimate for September was not substantially larger than the USDA inspection estimate. The level of outstanding sales is larger than that of a year ago, but new sales were small in the latest reporting week ended Nov. 3.
The USDA’s November forecast of the U.S. average soybean yield of 41.3 bushels was 0.2 bushels below the October forecast and 2.3 bushels below the 2010 average.
“The forecast represents the lowest yield since 2008 and the second lowest since 2003. Like corn, the lower yield and production forecast generated little price strength due to a 50-million-bushel reduction in the forecast of exports and a 35-million-bushel increase in the forecast of year-ending stocks,” Good said.
He added that the pace of U.S. soybean exports remains well below that of last year. However, the anemic pace of new sales in the last two weeks of October was followed by large new sales in the week ended Nov. 3.
“Production prospects remain generally favorable in South America, although USDA made a modest reduction in the forecast of acreage in Argentina and Paraguay. Those reductions were offset by larger yield forecasts for Brazil and Paraguay,” he said.
Although futures prices for corn remain in a relatively narrow range, basis levels generally remain quite strong and at record levels for this time of year in some markets.
“Spreads in futures remain very choppy, with the December-July spread fluctuating between 18 and 23 cents,” he said.
The apparent battle between current demand strength and expected weakness in 2012 continues.
“In contrast, soybean basis remains near typical levels and spreads are generally large. The January-July spread, for example, is near 30 cents, compared to only about 5 cents in early September. The weak basis and the relatively large carry reflect the generally weak demand situation,” he said.
For now, January soybean futures are holding just above the early October lows while December corn futures are well above the early October lows, but near the low end of the recent trading range.
“The recent sideways trading pattern might persist for an extended period, but the deterioration of market fundamentals suggests that prices could drift lower into the winter months,” he said.