March 29, 2006

Asian purchases of US corn likely to strengthen this year

While corn use for ethanol remains the darling of agricultural economists this year, recent developments exports of corn and in feed and residual use are also raising eyebrows.

Although corn exports during the first four months of the 2005-06 marketing year was less than the same period the last marketing year (when shipments were already at low levels), it has been picking up since January 2006.

Current USDA reports show that shipments since Jan 1 have surpassed those a year ago by about 80 million bushels. Japan, the largest buyer of US corn, has been buying higher volumes since January while sales to other Asian destinations have also increased.

Two factors account for this - China's suspension of its corn exports and a fall in Argentina's corn production.

The increase in corn consumption in Asia is occurring at a time when US producers are expected to reduce corn acreage.

As for feed, the USDA projected domestic feed and residual use of corn during the current marketing year at 5.825 billion bushels, a low figure compared to the record 6.162 billion bushels the previous marketing year. 

Feedlot numbers may not support such a low projection since the number of cattle in feedlots is 8 percent above last year's levels, according to analysts. Many analysts believe that feed and residual use of corn this year will exceed 6 billion bushels.