July 12, 2010

 

US corn reserves expected to fall on reduced output

Corn inventories in the US may slide 7.1% next year, with demand growing and less planting amid excess rain, according to the government.

 

"The reduction in the corn carryover has drastically changed the supply dynamics," Roy Huckabay, the executive vice president of Chicago-based Linn Group, said before the report. "Too much rain in the Midwest and hot, dry weather in the southern and eastern US are causing crops to walk backwards."

 

Corn futures for December delivery rose seven cents, or 1.8%, to US$3.9625 a bushel on July 8 on the Chicago Board of Trade, after touching US$3.975, the highest price since January 12. The most-active contract has jumped 15% since June 29, the day before the USDA said farmers planted less than they intended this year.

 

Smaller inventories may raise costs for companies including hog-processor Smithfield Foods Inc. and poultry-producer Pilgrim's Pride Corp., which said corn-based feed is their biggest expense. Ethanol makers such as Archer Daniels Midland Co. also may have to pay more for raw materials.

 

The USDA said in June that 87.872 million acres (35.6 million hectares) of corn were planted this year, based on a survey of farmers. That is up 1.6% from a year earlier. In March, growers indicated they would plant 88.789 million.

 

US production is projected at 13.245 billion bushels, down 0.9% from 13.37 billion forecast last month. Last year's crop was estimated at a record 13.11 billion. Average yields in 2010 may fall to 163.5 bushels an acre from an estimated 164.7 bushels last year. That estimate was unchanged from last month.

 

The amount of corn used to make ethanol in the marketing year that begins September 1 will increase 4.4% to 4.7 billion bushels from the current year, the USDA said. Exports will be unchanged from this year's 1.95 billion bushels, according to the department, which cut its forecast 2.5% from last month.

 

World production in the crop year that begins October 1 will reach 832.4 million metric tonnes, down from June's projection of 835.8 million while up 2.9 % from the current year, the USDA said.

 

Global consumption is forecast to jump 1.7% to 830.89 million from a record 816.83 million in the 12 months through September.

 

China, the world's largest corn consumer after the US, will import 100,000 tonnes in fiscal 2011, unchanged from last month's forecast, the USDA said. This year's imports are estimated at one million. China will become a net importer this year for the first time since 1996, USDA said.

 

Worldwide inventories will total 141.08 million tonnes on October 1, 2011, the lowest since 2008 and down from a revised 147.32 million forecast for the end of this marketing year. In June, the USDA projected 147.3 million.