Corn prices have declined to the lowest level since late August 2010. University of Illinois Ag Economist Darrel Good says this price weakness reflects supply and demand considerations. On the supply side – he says ongoing reports of yields that exceed expectations in many areas suggest the next USDA forecast of the U.S. average yield will be at least equal and perhaps exceed the September forecast of 155.3-buhsels. While there is still some uncertainty about the magnitude of harvested acreage that won’t be cleared up until the next Crop Production report is released by USDA – Good says it appears production will be large enough to result in a sizable buildup in stocks by the end of the current marketing year. As for demand – Good notes the partial government shutdown has left a void in the usual flow of weekly data. He says the primary news on the demand side has been the leaked report of an apparent EPA proposal to reduce the magnitude of biofuels mandates under the Renewable Fuel Standard beginning in calendar year 2014.
Currently – the RFS calls for a total of 18.15-billion gallons of renewable fuels in 2014 – including 3.75-billion gallons of advanced biofuels. The remaining 14.4-billion gallons can be satisfied with advanced or renewable biofuels. Good says the rumored proposal for 2014 is for a total of 15.21-billion gallons of biofuels – including just 2.21-billion gallons of advanced biofuels and a maximum of 13-billion gallons of renewable biofuels. The reduction in the non-advanced component of the mandate – according to Good – has been interpreted as a negative development for corn demand in 2014 and beyond. Good says a broader consideration of the potential impacts suggest that corn demand and therefore prices in 2014 might be largely unaffected by a reduction.
Good points out any final proposal from EPA would be submitted for public comment and says it’s premature to assume the rules in the leaked proposal will be the final rules for 2014.