friday, Jan. 25, 2013
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farm news / The messenger, forT dodge, iowa
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Is the corn demand market ended? 2013 may be record volatile year By DARCY DOUGHERTY MAULSBY yettergirl@yahoo.com
OMAHA — The year ahead could be one of the most interesting, if not one of the most volatile, periods in recent history when it comes to the corn market, some analysts predict. “The big question for 2013 is whether the demand market for corn that started in 2005-2006 is coming to an end,” said Darin Newsom, a DTN senior analyst. Domestically, corn-ending stocks in early January totaled 647 million bushels, a significant decline from the last time stocks dipped this low, with 883 million bushels estimated at the end of 1996-1997. Even more important, Newsom said, is the ending stocks-to-use ratio, which is a percentage measure of reserves. “This ratio was 5.8 percent in December 2012, making it the second lowest on record, right behind the 5 percent ratio in 19951996,” Newsom said. “As a result, we’ll need to have near-record corn yields and production in 2013 to meet all the different areas of demand.” Global stocks tighten Analysts are projecting record acres of corn in the United States this year, with a general consensus of 98 million acres. Much of this additional acreage is expected to be planted in the Northern Plains and the Southeast, said Newsom,
-Messenger/FarmNewsphotobyDarcyDoughertyMaulsby
WHILE SOME MARKET analysts believe the demand market for corn may be coming to an end, they acknowledge that much will depend on the weather in 2013. who added that weather will be a key factor in 2013. “Perhaps the ground is so good in Iowa, Illinois, eastern Nebraska and western Nebraska that maybe we don’t have to have all the subsoil moisture in place by planting, but we need to see weather patterns change to bring more moisture to many areas of the United States.” Three years of belownormal corn yields nationwide contributed to a decline in corn demand in the past three years, simply because the production wasn’t
there, Newsom said. While Brazil has filled some of this demand, global demand for corn has dropped in the 2012-2013 marketing year — the first time a decline has happened in 19 years. Global ending stocks continue to tighten, Newsom added. “You have to go back to 1973-74 to see levels close to the ones that exist today. The current ending stocks-to-use rate is 13.6 percent, which isn’t a lot higher than the 11.7 percent rate of 1973-74.” Rebuilding global corn supplies will depend not on-
ly on the United States’ 2013 crop, but on the crop that will be harvested in South America this March. Brazil has experienced near-ideal growing conditions, Newsom said, but Argentina has experienced some weather challenges that may curtail yields. “Also keep an eye on the Ukraine, which wants to plant more corn than wheat,” Newsom said. While global corn production and demand could certainly rebound this year, the future for domestic demand remains unclear. The
United States is running well behind pace on corn exports, and demand continues to languish on the livestock side of the industry, due to herd liquidation in both cattle and hogs. If drought conditions persist into the 2013 growing season, a renewed push for a waiver of the Renewable Fuels Standard remains a possibility, Newsom said. Huge price swings? Newsom isn’t the only one who thinks volatility will continue to define the corn markets and the weath-
er in 2013. So do 350 agribusiness executives who attended a recent Rabobank Forum and shared their opinions on topics they believe will be significant for global and North American agribusiness in the coming year, including: ∫ Extreme weather. Notably, 68 percent of attendees named weather extremes and volatility as the single biggest factor affecting North American food and agribusiness in 2013. This concern far outweighed the next two closest factors — consumer demand, 13 percent, and policies and regulation, 10 percent. ∫ Risk management. Reflecting the concern over continued weather volatility, 59 percent of poll respondents said the 2012 drought has changed their views about risk management. These executives cited an increased focus on financial liquidity, 25 percent, increased investment in risk management and insurance, 21 percent, and greater diversification, 13 percent, as leading solutions to hedge against continued volatility in weather patterns and commodity markets. In any event, it’s clear that investors don’t like uncertainty and volatility, said Newsom, who noted that investors don’t want to take a chance on corn this year. While it’s not out of the realm of possibility for corn prices to drop to the low- to mid-$3 range in the months ahead, it remains to be seen whether the demand market is falling apart, Newsom said. “So much will be riding on the weather this year. “We could see some huge price swings with every weather-related news headline that comes out.”
A report card: Taking stock of the checkoff
Ethanol JOHNSTON (ICPB) — Many individuals and groups working together made ethanol a success, and the Iowa Corn Checkoff remains an essential contributor to that team effort. From its very first project to today, the checkoff has paid for ethanol promotions, ethanol education, and ethanol advertising to create today’s market. When California challenged the Clean Air Act regulations requiring the use of ethanol, it was Iowa Corn Promotion Board-
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funded research confirming ethanol’s environmental benefits that helped the Environmental Protection Agency win the court battle. In the past decade, ICPB efforts advanced from simple ethanol promotion to support the development of Iowa’s farmer-owned ethanol industry and expand the fueling opportunities and resulting use of E85. Today, more than 75 percent of the fuel purchased in Iowa is ethanol blends, and the state has 175 E85
flex-fuel pumps. Iowa Corn continues to work to expand higher blends as E15 was approved by the EPA for use in 2001 and newer vehicles and the number of flex-fuel vehicles in Iowa is one in every 10. Ethanol promotion began paying off for growers as early as 1982. In years with excess grain stocks, ethanol demand helped reduce surpluses and cushion price declines. More recently, ethanol demand within Iowa has strengthened basis for growers, in-
creased corn prices, and grower ownership of new plants means farmers are sharing in the value-added profits from ethanol. Livestock, et al ICPB market development projects over the years have also helped build demand for new corn uses in sweeteners and plastics. In the livestock sector, the ICPB has contributed more than $5 million to develop pork and beef export markets through U.S. Meat Export Federation
programs. As Iowa ethanol production grew, the checkoff has also committed funds to distiller’s dried grains marketing and education — an initiative that benefits both to livestock producers and Iowa’s ethanol industry. Most people don’t know that one-third of every bushel processed in an ethanol plant comes back as a valuable livestock feed called DDGs. Through the Coalition to Support Iowa’s Farmers, the ICPB also supports growing Iowa livestock
Betty lived on the farm for 45 years and is now enjoying gardening at her Friendship Haven town home. “Meeting new friends, going for walks and the Wellness Center all make this the perfect place for me!”
production, one family at a time. Exports Export sales in the 20112012 marketing year set another new record, the result of a near-total rebuilding of export markets. The top U.S. markets of 1978 are gone: At that time, 60 percent of corn shipments went to the European Union, Soviet Union and Poland. As those markets disappeared, ICPB funding, See REPORT, Page 2C
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