USDA cuts hopes for rebuild in crop inventories

The USDA has cut hopes for a rebuild in crop stocks in 2011-12, with corn inventories to stay below one billion bushels.

Joseph Glauber, the USDA's chief economist, forecast "continued high costs" for grains as even a jump of 9.8 million acres in American sowings of major crops expected for this year fails to ease significantly tight supplies.

"Even with additional supplies expected this year, it is likely that the tight stocks to use situation will not be entirely mitigated over the course of one or even two growing seasons," he said.

The squeeze, while set to keep margins for livestock producers at "low levels", will present growers with even bigger prices, which will in corn, cotton, soy and wheat reach record levels.

The growth in sowings would be led by corn, Glauber said, firming up a preliminary USDA forecast revealed last week, in the so-called "baseline" report, of a rise of 3.8 million acres to 92 million acres in sowings.

However, even assuming a trend yield of 161.7 million bushels per acre, bringing the total harvest to an all-time high of 13.7 billion bushels, a significant rebuild in inventories would be prevented by strong exports and firm demand from ethanol producers

Corn supplies on August 31, 2012, will total 865 million bushels from 675 billion expected this year, Glauber said. Five billion bushels will be devoted to ethanol, compared with 4.95 billion for the 2010 crop.

Soy output in the US, the world's largest grower and exporter of the oilseed, will rise to 3.345 billion bushels this year from 3.329 billion in 2010, on a record 78 million planted acres, Glauber said. End-of-year inventories will be at 160 million bushels, an increase of 20 million bushels, according to the USDA.

Wheat production will be 2.08 billion bushels, down from 2.208 billion in 2010, because of lower yields even as acreage rises to 57 million acres from 53.6 million acres, Glauber said. US wheat exports are forecast at 1.15 billion bushels, down almost 12% from this year's 1.3 billion bushels. Stockpiles before the next harvest are forecast to fall to 663 million bushels on higher food and feed use.