US corn reserves expected to take an upturn

US corn inventories before the 2011 harvest may reach a five-year high after farmers planted more this year at a near-record pace, boosting yield potential.

"Corn supplies are going to be comfortable," said Dale Durchholz, the senior market analyst for AgriVisor LLC in Bloomington, Illinois. "Without a weather problem this summer, there is no urgency to buy corn supplies ahead."

Corn futures for July delivery fell 1.5 cents, or 0.4%, to US$3.705 a bushel on May 10 on the Chicago Board of Trade (CBOT). The most-active contract has dropped 11% this year.

Larger inventories may lead to lower costs for companies including hog-processor Smithfield Foods Inc. and poultry-producer Pilgrim's Pride Corp., which said corn- based animal feed is their biggest expense. Ethanol makers such as Archer Daniels Midland Co. may also see lower expenses.

In a March 2010 survey, US farmers indicated their plan to sow 88.798 million acres (39.5 million hectares) with corn this year, up 2.7% from 2009. That crop will be harvested in the marketing year that starts September 1, 2010.

Average yields may fall to 163.5 bushels an acre from an estimated 164.7 bushels for last year's crop, leaving production at 13.37 billion bushels, compared with a revised 13.11 billion collected last year, the USDA said. The government in February projected a crop of 13.16 billion bushels, based on an average yield of 160.9 bushels, from 89 million acres planted.

The amount of corn used in livestock feed will fall to 5.35 billion bushels from 5.375 billion estimated for the 2009-2010 year, the department said. About two billion bushels will be exported, up from 1.95 billion estimated for the year that ends August 31, 2010, the USDA said. A record 4.6 billion bushels will be used to make ethanol, up from an estimated 4.4 billion for the current marketing year, the department said.

World production in the crop year that begins October 1, 2010 will reach 835.03 million tonnes, up 3.3% from 808.57 million tonnes estimated for the current year, the USDA said in its first assessment for the coming marketing year.

Global consumption is forecast to rise to 827.87 million tonnes from a record 808.88 million in the 12 months through September. Corn is the biggest US crop, valued at a US$48.6 billion in 2009.