July 13, 2010

 

US corn supplies to become tighter than previous years

America's corn supplies are to prove even tighter than in the run up to the price spike two years ago, after official statisticians surprised markets with lowball sowings and inventory estimates.

 

Rabobank, revising up forecasts for prices of both corn and wheat, estimated US corn inventories would fall by more than 13% to 1.23 billion bushels the 2010-11 crop year, following last week's surprise USDA figures.

 

The USDA cut its forecast for American corn sowings, adding that stocks left over from the last harvest were weaker than analysts had expected. On Rabobank estimates, the fall in corn stocks will leave them at 9.1% of consumption - the lowest ratio for 15 years, and indeed below the 11% figure in four years ago which helped propel farm commodity prices higher. The stocks-to-use ratio is a key measure of market tightness, which in turn has a large impact on the prices buyers need to pay to secure supplies.

 

Even corn stocks at this level assume that American corn farmers achieve an average yield of 164.5 bushels per acre, the second highest on record.