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Anticipation of a big corn carryout

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Analysts say for the first time in 10 years, the US could see a 2 billion bushel carryout on corn.  John Newton, assistant professor at the University of Illinois, says the potential for that number also brings up concerns about commodity prices.  “At that point in time the marketing year average for corn was $2 a bushel,” he says.  “When people start to talk about the prospects of another 2 billion bushel carryout of corn those type of corn prices logically jump into their mind.”

At this time, Newton tells Brownfield he doesn’t think $2 corn is on the horizon.  He says there are a lot of differences in the market today, the largest of those – is the ethanol market – which he says uses 40 percent of the corn crop each year.  “What happens when you have a 2 billion bushel carryout, or anything close to that at the end of the year – the consumption levels that we have are at a partially due to ethanol, and are high enough so that our stocks-to-use ratio isn’t as high as it was back when we saw $2 corn.”

He says a recent stocks-to-use analysis shows the implied corn price associated with a 2 billion bushel carryout may be consistent with the current marketing year projection of $3.70 per bushel.

 

 

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