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Green Plains doubts chances of corn price revival

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Green Plains downplayed the prospect of a recovery in corn prices, flagging increased yield prospects and a large of farmer selling still to come, even after a spurt in producer marketing early this month.

The ethanol producer said that there was "nothing very bullish" for corn investors to focus on, given an improvement in the weather, which has meant that the US crop has "fully stabilised".

The western Corn Belt "has some of the best crops we've ever seen in Nebraska, Iowa, Minnesota, South Dakota", said Todd Becker, the chief executive of Green Plains, which is a major buyer of corn.

And while crop condition is less certain in the eastern Corn Belt, where corn "has some issues", he said that "I think now the weather is in our favour.

"We think we will have a nice, strong finish" to corn development.

Yield upgrades

Already, prospects for the US corn yield have seen a "bump" to about 165-166 bushels per acre, Mr Becker said, citing the official condition rating for the crop, which was as of Sunday viewed as 70% in "good" or "excellent" health.

Separately, Chicago broker RJ O'Brien on Wednesday raised its estimate for the US corn yield to 165 bushels per acre, while rival Futures International earlier in the week lifted its forecast by 0.8 bushels per acre to 167.5 bushels per acre.

The US Department of Agriculture has forecast a yield of 166.8 bushels per acre, although this remains below the record 171.0 bushels-per-acre result achieved last year.

CHS Hedging highlighted the strong potential for corn in Minnesota, in the western Corn Belt, noting private forecasts for "an average yield potential for the state of up to 186 bushels per acre with yield potentials of 240 bushels per acre in the best areas".

'Plenty to sell'

Mr Becker also noted that "the farmer has plenty to sell still" in corn, even after a marketing spree during the jump in corn prices in late June and early July.

Closing prices of Chicago's December corn futures contract jumped 22% in the month to July 13.

"On this last rally, the farmer really engaged on selling old crop and new crop corn," he said, adding that this had allowed Green Plains to snap up supplies, besides gain commitments for the stores it has built near ethanol plants to reduce the need to buy from elevators and so expand margins.

The strategy of building storage space for producers next to ethanol plants is designed to save the group about $0.07-0.10 per bushel in corn on its purchases, equivalent to about $0.03 per gallon of ethanol.

Margins expand

Meanwhile, ethanol production margins have anyway seen a boost from the retreat in corn futures, which stand 16% below their high two weeks ago.

"In the last eight, nine days, from low to high, we've seen a $0.15 expansion in margins overall," Mr Becker said.

Wednesday had seen group margins "starting finally to go back to the double-digit" range for the group in the August-September timeframe, with Green Plains' most profitable plants, in the eastern Corn Belt, seeing a figure above $0.20.

For the October-to-December quarter, the margin had reached the "high single digits".

By Agrimoney.com

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