The price of corn, like the price of other commodities, is
influenced by a wide array of factors that reflect a combination of current and
expected supply and consumption. The market continually judges whether the
price of corn is adequate to ration the available supply. While expectations
about demand over the course of the marketing year influence that judgment, the
on-going pace of consumption reveals the adjustments that are being made to
accommodate the available supply. A pace of consumption that cannot be
supported implies the need for higher prices, while a slower pace than required
implies the need for lower prices.
In the current marketing year, the small U.S. crop requires a
substantial reduction from the level of consumption in the 2011-12 marketing
year. Based on the current forecast of the crop size, imports of 75 million
bushels, and the assumption that year-ending stocks cannot be reduced below
about five percent of consumption, corn consumption during the current marketing
year will be limited to about 11.2 billion bushels. That is 1.326 billion
bushels (10.6) percent less than consumed in the previous marketing year. The
USDA has forecast a decline in consumption of 1.376 billion bushels and
year-ending stocks slightly above five percent of consumption. By category,
the USDA has forecast that exports will decline by 393 million bushels (25.5
percent), corn for ethanol and by-products will decline by 500 million bushels
(10 percent), other processing uses will decline by 71 million bushels (5
percent), and feed and residual use will decline by 412 million bushels (9
percent). <Read More>
