March 11, 2011

US government raises estimates for supplies of corn and soy

The US government forecasted that corn and soy stocks will be more than originally estimated, lessening concerns about increasing food prices.

The USDA predicted on Thursday (Mar 10) that there will be about 123.1 million tonnes of corn remaining after this year's harvest; an increase from an estimated 122.5 million tonnes in last month's report. There should be about 58.3 million tonnes of soy remaining, as compared to last month's estimate of 58.2 million.

The new estimates should push crop prices lower in coming weeks as traders worry less about lower reserves, said an analyst.

Corn prices were reduced by 8% to US$6.71 a bushel in morning trading while soy prices dropped 6% to US$13.2675 a bushel.

Tighter reserves resulted in worldwide grain prices doubling this year. Corn was being sold and bought for just US$3.50 a bushel as recently as this summer. However, rising demand from ethanol producers and consumers in developing countries like China has stripped supplies. The government forecasts corn reserves this year will hit their lowest level in 15 years.

The government estimates that food prices could increase by more than 3% this year as processed food makers and grocery stores pass their higher costs for raw ingredients to consumers. Still, crops like corn and soy account for just 10% of the raw ingredients used in processed foods. As such, it may take months for higher prices to reach consumers.