An update from University of Illinois is projecting a rise in global Corn prices. Corn futures prices moved lower last week despite the slow pace of corn planting thus far this year. High levels of corn consumption continue to peck away at the corn stocks carried over from last years production. When combined with a robust consumption scenario for the remainder of the year, the possibility of significantly lower corn production in 2018 creates a bullish outlook for corn prices. Corn consumption continues to see support from ethanol production. The current USDA projection of 5.575 billion bushels of corn used for ethanol production is well within reach as ethanol production has eclipsed a million barrels a day for 14 consecutive weeks.
Corn consumption for ethanol production used 2.79 billion bushels through the first half of the marketing year. Based on ethanol production since February, corn used in ethanol production as of April 13 is approximately 3.6 billion bushels. Recent highs in implied gasoline demand and the prospect of expansion to year around E-15 blending support a positive outlook for corn use in ethanol this year. Ethanol exports continue at a robust pace and look to provide additional support for corn use in ethanol. Through the first half of the marketing year, ethanol exports came in 6.7 percent higher than last year, at 768 million gallons. February export levels received a boost with 33 million gallons of ethanol going to China, the highest monthly total since April 2016. The levying of an additional 15% tariff on US ethanol exports in April by China will severely limit ethanol exports to that country for the rest of the year. Despite the tariff rate quota placed on US exports by Brazil in September, ethanol exports to Brazil remain strong.
However, ethanol exports during the first half of the marketing year in Brazil came in seven percent lower than last year. The current pace of ethanol exports indicates a fifth consecutive marketing year of expansion with over 1.5 billion gallons exported, but trade issues may dampen exports. Corn exports continue to strengthen despite a weak performance in the first half of the marketing year. At 790 million bushels, exports through February were 290 million bushels smaller than the 2016-17 marketing year pace. The weekly rate of export inspections picked up noticeably in March. As of April 19, corn inspected for export during the marketing year came in at 1.17 billion bushels.
Cumulative Census Bureau export estimates through February exceeded cumulative export inspections by 37 million bushels. If that margin has persisted, exports through April 19 totaled 1.208 billion bushels. An additional 1.04 billion bushels of exports, an average of 52 million bushels per week, is necessary to reach the current USDA projection of 2.25 billion bushels. For the six weeks ended April 19, weekly export inspections averaged 63 million bushels per week. Additional support for U.S. exports is developing in South America.
The USDA projects corn production in Brazil and Argentina at 3.6 and 1.3 billion bushels respectively. The dry weather in Argentina hampered the corn crop this year, and production currently sits 300 million bushels below last years level. Developing dryness in southern Brazil over a substantial portion of the second-crop corn hints at the prospect of additional losses in Brazilian production. U.S. corn export strength should continue into the summer months and the 2018-19 marketing year with the continuation of modest corn prices.