That was the biggest surprise in Friday's supply-demand report, even though analysts expected less stocks available, the report did not indicate that.
"After last week's report, most people expected that the government would come in and lower their carryout for this year, which ends August 30. But they did not change the ending stocks from last month to this month even though there were less stocks available, which would imply that you needed to take corn from 675 million bushels down to 550 or 525," explains Jerry Gulke, President of the Gulke Group.
Gulke says that USDA probably had to put a line in the sand and couldn't bring stocks lower than 675. So with Friday's report they adjusted usage as they increased corn for ethanol use and reduced expected feed and residual use.
According to USDA, corn used to produce ethanol is raised 50 million bushels as strong blender incentives and positive ethanol producer margins continue to encourage expansion in ethanol production and use. Rising gasoline prices have pulled ethanol prices higher helping to offset increases in corn feedstock costs for ethanol producers. Meanwhile, the U.S. corn feed and residual use is lowered 50 million bushels as increased prospects for 2011 SRW wheat production and higher year-to-year corn plantings in the South reduce expected corn feed and residual disappearance during the second half of the 2010/11 corn marketing year.
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