Source:  Rita Jane Gabbett, MEATINGPLACE, 10/6/11

 A USDA official acknowledged that even USDA analysts are puzzled by the larger-than-expected corn stocks discovered by the agency’s National Agricultural Statistics Service survey that have sent corn prices down sharply since the report was issued Sept. 30.

There have been several hard-to-explain anomalies in corn supplies and use this year, Jerry Bange, chairman of USDA’s World Agricultural Outlook Board, told attendees at the National Chicken Council annual meeting here.

Noting the surprise 1.1 billion bushels in corn stocks at the end of the 2010/11 marketing year, Bange said, “If you have a stocks number that big, it implies something drastic happened in…the feed and residuals category.”

He also noted the oddity of wheat stocks also ending up higher than expected, even as the wheat crop turned out to be lower than expected. "That was hard to explain because everybody at that point was thinking, well, we must be feeding more wheat.”
Bange said another anomaly has been quarter-by-quarter corn feeding patterns, with less than 25 percent of the feed and residual use occurring in the third and fourth marketing year quarters. “That’s just very unusual.”

Ethanol
Bange told the poultry industry executives that ethanol producers and blenders are both making a profit, which points toward continued strong corn use for ethanol. He said ethanol producers are making 37 cents per gallon, “So it pays to produce ethanol.”
He said ethanol blenders are earning 12 cents per gallon, even before the 45-cents-per-gallon subsidy, making the total blending profit 57 cents per gallon.

Bange pointed out that at 14 billion gallons of annual corn ethanol, production is nearing the 15 billion gallons standard for subsidized production, “And then the economics take over and the economics right now say we will continue to be producing ethanol.”

Soybean meal prices, said Bange, are being driven by soybean oil use, in part for biodiesel production. “There is money to be made now in converting soybean oil into biodiesel.”

South American corn
“You need to keep an eye on South America. Corn production in Brazil is rising dramatically,” Bange told the poultry executives, whose businesses are dramatically affected by corn prices.

"The Brazilians are doing a very good job of opening up corn production, just as they did on soybeans,” he said, noting a record crop last year and prospects of another 7 percent increase this year. “That will have an impact on corn prices on the U.S.”

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