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Ethanol Pulling In US and Global Corn Supplies

17 February 2011

AUSTRALIA - Corn ending stocks in the US are the lowest since 1995-96, according to the latest US Department of Agriculture report.

The World Agriculture Supply and Demand Estimates, released last week shows a tight balance sheet for US and global corn, reports

US ending corn stocks for this season were cut by 1.78 million to 17.14 million tonnes.

Emerald Group risk manager Brian Dalitz said demand for corn for ethanol, domestic animal feed and export were all factored into the US equation. He said there was big demand for corn for ethanol in the US.

"The ethanol usage is higher than the market expected," Mr Dalitz said.

Mr Dalitz said the US Department of Agriculture had confirmed corn was undervalued and in short supply. He said the flow-on effect was continued support for Australian export feed grain prices.

"The US exports corn into Asia, with Japan and Korea being the main importers," Mr Dalitz said.

He said the one-in-100-year level of feed grain production on Australia's east coast was driving the exports.

"Our export market is now feed grain," he said. "Our exporters usually think about marketing bread wheat, now they've got to think about how to export feed grain into a market they're not familiar with."

However, Dalitz said it was unlikely Australia's east coast would see these high levels of feed grain again and would not be able to supply the Asian market.

"Usually, the east coast produces 12 to 13 million tonnes of milling wheat," Dalitz said. "This is the first time we've seen the majority of the crop downgraded to feed."

Dalitz said Australian farmers should be looking at the US corn futures on the Chicago Board of Trade instead of US wheat futures.

Australia's total wheat production estimates outlined in the USDA report remained unchanged at 25 million tonnes. Dalitz expected Queensland, NSW and Victoria to produce 15.5 million to 16.5 million tonnes of wheat this season, well above the seven-year average of 10 million tonnes.

"All that additional tonnage is feed wheat," he said.

Dalitz said there would be additional stocks of feed grain around next harvest, that would act as a buffer if there was another drought.

TheCropSite News Desk

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