June 21, 2011
For the fifth consecutive year, the global corn produce on its highest level will still fail to meet demand for food, fuel and livestock feed, cutting supplies to the lowest in two generations.
Consumption will rise 3% in the next marketing year, a 16th consecutive annual gain that saw demand jump 66%, according to USDA estimates. Inventory will drop to 47 days of use, the fewest since 1974, the data show. Waterlogged fields in the US, the largest exporter, will curb yields, Goldman Sachs Group Inc. says. Corn may jump 36% to a record US$9 a bushel if conditions worsen, Morgan Stanley says.
Corn purchases are accelerating as droughts and floods limit output gains in everything from soybeans to wheat, driving the Standard & Poor's Agriculture Index of eight commodities 60% higher in 12 months. China will use 47% more than a decade ago, adding an amount greater than the entire crop of Brazil.
Global production will rise 5.6% to 866.2 million tonnes in 2011-2012, still too little to meet demand of 871.7 million tonnes, according to the USDA, which combines variable local marketing years for its estimates.
China's pork consumption doubled in the past two decades and demand for chicken quadrupled, the USDA estimates, boosting requirements for grain-based animal feed. Surging energy prices and subsidies spurred ethanol production, with the US industry using seven times more corn than 10 years ago.
Livestock owners may cull herds, increasing meat supply, because of higher feed costs. Wholesale choice-beef prices dropped 9.9% since reaching a record April 5, and pork is down 2.6% from a May 16 high, USDA data show. Bacon retailed at US$4.77 a pound in May, 24% more than a year earlier, data from the Bureau of Labor Statistics show.
Any decline in demand from livestock producers will be overwhelmed by the anticipated jump in Chinese consumption. The nation will use a record 181 million tonnes in the year that starts October 1, the USDA said in a June 9 report. China's pork production will reach an all-time high of 52.5 million tonnes in 2011, while chicken output will advance to 13.2 million tonnes, the most ever, according to the USDA.
Those delays increased the risk of supply being lost, said Shawn McCambridge, the senior grain analyst at Prudential Bache Commodities LLC in Chicago. Should hot, dry weather in July or August hurt crops, prices may rise to US$8.50, he said. Corn planted in wet soil has shallower roots, diminishing its ability to withstand such conditions.
Temperatures as much as 10 degrees Fahrenheit above normal and dry soil from Texas to North Carolina are already threatening yields, according to Michael Cordonnier, the president of the Soybean and Corn Advisor in Hinsdale, Illinois.
This year's weather patterns are similar to 1993 and 2009, Motew said. Yields rose in 2009 because the summer months were cool and there was no frost before the harvest, he said. In 1993, yields plunged 23%.
