Fledgling Demand:

Published on: 17:02PM Sep 24, 2009
It is good to know the second and third largest annual consumers of US corn are exhibiting signs of resurrected demand. Very early in the 2009-10 marketing year weekly corn export sales have bettered the amount needed to per week to reach USDA’s ultimate target of 2.2 billion bushels, two of the first three weeks despite a plethora of world (feed) wheat stocks.
Based on the most recent data, the divergence continues to widen between reformulated gasoline prices and less expensive ethanol which is bullish for ethanol production. August data suggest for the third consecutive month ethanol processors have a positive net return per bushel of corn they buy after a six month stretch of less than breakeven.
The US largest user of corn is for feed use and of key importance to help support prices. The most recent five year average has corn for feed use utilizing  49.7 % of annual production, ethanol 20% and exports using 17.7%.
Within the corn for feed use, the largest group using corn is the beef with 34% of the market and then the poultry sector using 27%. Allendale Inc estimates 5.3 billion bushels of corn used for feed used in the 2009-10 marketing year and more specifically 1.431 billion bushels of corn to be fed to poultry. A second very important statistic to note is poultry typically use the largest amount (50%) of annual soybean meal production!
Encouraging is the developing trend of the broiler chicks placed which is in most respects a stark contrast to year earlier trend. As you are able to view the optimistic long term trend of 2009 is in more unison with the 2007 trend. One may suggest a combination of reduced corn input pricing and a gradual return to meat based protein, in this case most efficient feed to weight gain poultry is positive for demand.
Research further, Arkansas, the nation’s second strongest broiler producer presently has cash corn prices of $3.20 per bushels vs year earlier levels of $5.10 per bushel. This 37% drop in price is likely having a major positive impact for poultry production and is welcomed.
Allendale Inc suggest the following development is encouraging and may shed some longer term light on corn and meal usage for meat protein base production of first poultry, hogs and then beef. Yes a key outside influence does remain with regards to the healing of the US and world economy. However it is refreshing to see there is the potential for the ember at the end of the tunnel to metamorphose into brighter days ahead.
What are your thoughts, is there growing evidence of building demand? Is there evidence in your region of greater end user demand? How do these developments impact your 2009-10 marketing plans?
We welcome your questions and comments.........Joe Victor
Allendale Inc welcomes any questions you may have by calling 800-551-4626 or
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