Stocks-to-use is a measure of projecting ending stocks of corn relative to total demand for the market year. From September to January the projected stocks-to-use levels averaged 5.8 percent – the lowest levels seen in three decades. And those ranges are expected to hover between 5 and 7 percent through April.

As with crops, the U.S. took a major production hit to hay in 2012, falling to lowest levels since 1956.

“It’s no surprise we’ve had record-high prices as a result,” Spearman said, noting how lower stocks-to-use lead to higher prices, and high stocks lead to lower prices.

Those high prices have maximized the incentive to grow more corn and soybeans, a trend that’s grown domestically and globally.

The U.S. is the largest producer of corn in the world. But the production growth outside the U.S. has outpaced corn production in the U.S. Whereas the U.S. produced 40 percent of all corn worldwide in 2000-2001, today that figure stands at 32 percent.


All markets are starting to ration their production, leading to a smaller demand for U.S. exports. The Ukraine and South America have seen more demand for their corn stalks, allowing the U.S. to ration its own.

The ration trend was also seen in ethanol production in 2012, as production levels dropped heavily in the late summer as corn markets rallied. The ethanol production decline is now below the previous two years.

“So we are rationing the producer of ethanol, but we have yet to ration the use of ethanol by the blender,” Spearman said. “That’s where the RFS (Renewable Fuel Standard) comes in. The RFS mandates that the refiners use so much ethanol, but it does not mandate that we produce the ethanol.”

That equation led to the U.S. importing more ethanol. Spearman said production is predicted to fall short for ethanol needed to meet the RFS for 2013.

The market will encourage producers to push corn and grain acreage to record levels in 2013. More acres will come out of the CRP program, but the profits are all conditional on Mother Nature.

“We need to have substantially better weather conditions than what we had last year,” he said. “If that’s realized, I think we can see stocks levels recover substantially whether it be corn or hay, and also see substantially lower prices come into next fall.”

“Prices are going to have to continue to ration demand and with that we expect to see corn prices continue to find major resistance around the ($)7.65 to ($)7.75 per bushel area,” Spearman said. “We should find major support from the ($)6.85 to ($)7.00 per bushel area into the month of June, when we’re transitioning from old crop to new crop.”

Spearman said the amount of acreage dedicated to corn will grow between one million and 1.5 million acres – to a record 98 million acres; soybean plantings will jump from 77.2 million to 79 million. But the key focus will be the yields, which dropped to 123.4 bushels per acre in 2012.

With a trendline yield of 157 bushels per acre, the crop would go to 14 billion bushels. If the yield drops to 150 bushels per acre, the 13.5 billion bushel crop still amounts to record-large volumes.  end mark

TOP RIGHT: CattleFax grain and forage analyst Chad Spearman. Staff photo.