October 11, 2010

USDA predicts tighter local corn and wheat stocks

The USDA has cut its local corn and wheat output forecasts this year, a move it said will push up prices for farmers and reduce supplies.

US farmers are now expected to produce just 12.664 billion bushels of corn this year, the USDA said in its monthly World Agricultural Supply and Demand Estimates report. That's a 496-million-tonne drop from the 13.16 billion bushels that the USDA was predicting just a month ago, but demand on the crop from ethanol producers remains high and more will be needed by the livestock industry.

The ethanol industry is still expected to consume 4.7 billion bushels of corn this year - about 37% of production - and about 5.4 billion bushels will be fed to livestock, 150 million more bushels than predicted a month ago.

The USDA made a large revision on Friday (Oct 8) to its estimate on how much corn will be left over from the 2009-10 marketing year for use in the current 2010-11 marketing year, but this year's supply is still expected to be tight.

Ending stocks of corn for the current 2010-11 marketing year, which began September 1, are now expected to total just 902 million bushels, down from USDA's September forecast of 1.116 billion.

USDA's estimate for average prices farmers get for their corn jumped in the Friday (Oct 8) report to a range of US$4.60 per bushel to US$5.40 per bushel, up from last month's estimate of US$4.00 to US$4.80.

Farmers are also now expected to get more for their wheat, the USDA said, raising the price range to US$5.20 to US$5.80, up from US$4.95 to US$5.65.

The USDA cut its forecast for US wheat production to 2.224 billion bushels, down from the September forecast of 2.265 billion bushels. And that was enough, together with lower production seen in Canada, Mexico and Algeria, to push down world production, further tightening supplies, the USDA said.

"Global wheat supplies for 2010-11 are projected one million tonnes lower, mostly reflecting lower production in the US," the USDA said in the Friday (Oct 8) report.

Last month the USDA cut its forecast for global wheat production primarily because of the drought-damaged Russian crop. On September 10, the USDA lowered its forecast for world wheat production to 643.01 million tonnes, down from 645.73 million tonnes. On Friday (Oct 8), USDA lowered it further to 641.44 million tonnes.