Corn Price Potential May Rest With Ethanol Demand

URBANA, IL – Stronger export numbers and lower acreage have boosted corn prices since the end of June but demand weakness in ethanol production is concerning.

According to Dr. Todd Hubbs, University of Illinois agricultural economist, a recovery in economic activity helped ethanol plants ramp up production as gasoline demand increased yet a resurgence in coronavirus and associated travel restrictions are threatening the short run and injecting more uncertainty in long-range prospects.

Ethanol production for the next marketing year contains a massive amount of uncertainty due to the current economic outlook. USDA forecasts corn use for ethanol at 5.2 billion bushels this marketing year.

The Energy Information Agency (EIA) projects ethanol production five percent lower than pre-coronavirus production levels over the next marketing year.

Dr. Hubbs explains improving weather prospects and uncertainty about the economic outlook hold the keys to corn price developments over the near term, and says the importance of ethanol as a corn demand source remains crucial.
(SOURCE: FarmDoc Daily)