Strength
of export demand for U.S. corn will be important as U.S.
corn production struggles to keep up with domestic demand
for ethanol production, said a
University of Illinois
Extension marketing specialist.
"Softer
export demand, along with a significant increase in U.S.
corn production in 2007, would provide a little more
breathing room in the tightening supply and demand balance
sheet," said Darrel Good.
Good's
comments came as he reviewed U.S. corn exports. The USDA
expects U.S. corn exports during the current marketing year
to reach 2.25 billion bushels. At that level, exports would
be 103 million bushels larger than shipments of a year ago
and at the highest level since 1989-90.
Historically, marketing year U.S. corn exports have exceeded
two billion bushels only eight times. Prior to last year,
exports had not exceeded two billion bushels since 1995-96
and had languished in the range of 1.5 to 1.98 billion
bushels.
"Exports
started their recovery in the second quarter of the 2005-06
marketing year and were especially large in the summer of
2006," said Good. "At 620 million bushels, exports in June,
July, and August of 2006 were the largest since 1980 and
were the fourth largest ever.
"Exports
during the fall of 2006 were estimated at 592 million
bushels, the largest since 1995. The pace of exports
remained large through the latest reporting week of Feb. 8."
The USDA
reported cumulative export inspections from Sept. 1, 2006
through Feb. 8, 2007 at 949.2 million bushels, 138 million
more than inspected during those same 23 weeks last year.
Cumulative exports estimated by the USDA in the weekly
Export Sales
report had reached 983.6 million bushels by Feb. 8.
"It is
typical for total shipments to exceed the amount inspected,"
said Good. "The official source of corn export estimates,
however, is provided by the Census Bureau. It is not unusual
for Census Bureau estimates to exceed those in the USDA's
report of exports."
For the
current year, Census Bureau estimates are available through
December 2006. At the end of December, cumulative estimates
from the Census Bureau exceeded those of the USDA by 22.3
million bushels. If that margin of difference persisted
through Feb. 8, cumulative exports were likely near 1.006
billion bushels, meaning that exports averaged 43.74 million
bushels per week through the first 23 weeks of the marketing
year, Good noted.
"To reach
the USDA projection of 2.25 billion bushels for the year,
shipments need to average about 42.9 million bushels per
week during the last 29 weeks of the year, for a total of
1.244 billion bushels," he said. "As of Feb. 8, the USDA
reported that 475.5 million bushels of corn had been sold
for export during the current marketing year, but not yet
shipped.
"That
figure implies that new sales need to total only about 770
million bushels to reach the USDA projection. That is an
average of 26.6 million bushels per week."
The large
increase in year-over-year export commitments of U.S. corn
this year reflects larger purchases by Mexico. As of Feb. 8,
the USDA reported that Mexico had purchased 255 million
bushels of U.S. corn for delivery during the current
marketing year. That compares to purchases of 148 million at
the same juncture last year. Mexico accounts for 40 percent
of the year-over-year increase in export sales of U.S. corn.
"In
addition to increased demand from Mexico, U.S. corn exports
have benefited from at least four other factors," said Good.
"First, a continuation of relatively small exports from
China has provided the United States with a larger share of
the world market. South Korea, for example, has purchased
about 10 million bushels more U.S. corn this year than
purchased last year as a result of a limited supply from
China.
"Second,
a small 2006 corn crop in Argentina resulted in a
200-million-bushel reduction in Argentine corn exports, also
providing the United States with a larger share of the
export market. Third, the small world wheat crop of 2006
likely increased world demand for corn."
Finally,
he added, strong world demand for corn will push consumption
to a record level, forecast at 28.7 billion bushels during
the current marketing year.
The
strong world demand for U.S. corn has been one of the
factors contributing to the significant strength in corn
prices over the past five months.
"However,
demand for U.S. corn may weaken somewhat over the next
several months," he said. "The rebound in Argentine corn
production suggests increased competition for U.S. corn.
Record production in Brazil this year may also result in
another 30 to 40 million bushels of exports from that
country.
"Finally,
a significant rebound in world wheat production could soften
the demand for U.S. corn. The wild card will continue to be
the magnitude of Chinese corn exports."