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Corn Prices Drop with Reduction in Export and Ethanol Demands

Monday, February 25, 2013

Adequate U.S. corn supply in 2013 expected to lower costs
Adequate U.S. corn supply in 2013 expected to lower costs


According to a recent report from the USDA, 2013 will see a corn price drop throughout the course of the year due to sufficient supply. An article from Minnesota Farm Guide stated that the decreased cost and likely pace of consumption will allow U.S. growers to produce an adequate crop that meets, and potentially exceeds, USDA projections.

For 2013, the USDA estimates an export of 900 million bushels, 14 million bushels per week. This is the lowest projection the USDA has seen in 41 years; the USDA attributes the corn price drop to limited exports and reductions in ethanol production. On February 1, 2013, corn was priced at $7.45 but future predictions estimated that corn prices will drop by 45 cents in March and continue at a varying level of reduction through 2013. According to the article, the reduced supply and demand of corn production will allow corn growers to reach USDA requirements despite the small corn crop of 2012.

Darrel Good, University of Illinois Extension grain economist, said “During the first five months of the year, [expected] ethanol production was about 12 percent lower than during the same time last year. Favorable blending margins, prospects for a slowdown in imports of Brazilian ethanol, and some improvement in ethanol production margins suggest that the pace of ethanol production will increase enough to at least reach the USDA projection of corn use.”

The supply of corn crop is satisfying its demand, reported the USDA, which indicates U.S. corn growers are fulfilling weekly quotas and will be on pace to meet the USDA projections for 2013.

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