July 10, 2009

US corn supply is expected to increase, as farmers prepared to produce a bumper crop while livestock and ethanol producers back away from expensive corn due to poor profit margins, analysts said.

Earlier on, it is thought that ethanol numbers might increase and livestock would stabilise, but it did not seem likely now, said Terry Roggensack, analyst for The Hightower Report.

Roggensack said the combined factors of low cattle on feed numbers, good pasture and range conditions, and huge losses from hog producers have lowered corn demand, resulting to a growing corn stockpile.

The only bright spot for the old-crop is the decent export sales data, but it is not enough to offset the sluggish demand in the other sectors, he said.

The USDA will soon release its July supply/demand report. An average of analysts' estimates pegged the 2008-09 or old-crop corn stocks at the end of this marketing year (Aug 31) at 1.7 billion bushels, up nearly 6.5 percent from the 1.6 billion bushels forecast by USDA in June, and also up nearly 6.5 percent from the year-ago stockpile.

Ethanol numbers are not living up to previous USDA forecasts and quarterly stocks are also higher than expected, implying lower feed usage, said Bill Nelson, analyst for Doane Advisory Services.

Analysts pegged the 2009-10 corn ending supply at 1.563 billion, 43-percent more than the 1.090 billion USDA estimate in June.