USDA ups corn acreage forecast, current corn reserves; corn futures fall more than 10 percent

The U.S. Department of Agriculture released a new estimate of US corn production, raising its acreage estimate to 87.3 million from 86.0 million in March. The USDA also reported that current grain stocks were higher than anticipated, at 4.028 billion bushels, up from 3.93 billion. The report prompted a massive sell-off of July corn futures, which fell by the daily allowed trading maximum to $7.25 per bushel.

Commenting on the prospects for corn prices remaining above $6.00 per bushel, Raymond James analyst Pavel Molchanov commented “The latest escalation in corn prices is clearly a negative for U.S. ethanol producers, though hedges in place dating back to 2007 should help for the time being. As a broad observation, it is apparent that high corn prices continue to present a bigger challenge to the ethanol industry than ethanol prices, which remain below gasoline ($2.90/gal vs. $3.50/gal as of last Friday) but are actually quite attractive in absolute terms given the $140+/Bbl oil price environment.”

A complete Biofuels Digest news background report on the US corn ethanol crisis is here.

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