January 14, 2011

USDA cuts 2011 soy, corn supplies

US corn and soy stocks will be drawn down to uncomfortably thin levels in 2011, according to a government report Wednesday (Jan 12) that sent grain prices soaring.

Dwindling stocks in the world's biggest food exporter, depleted by ethanol demand and a sharp reduction in estimated corn and soy production last year, and poor crops in other major exporting countries are setting up what could be one of the toughest years for food prices and supplies since 2008.

The market is drawing parallels with the tight supplies of that year and is concerned that runaway food prices could again lead to shortages and unrest in poor countries.

USDA forecasted that by the time next year's crop is ready for harvest in September, stocks of soy will be just 140 million bushels, 10% below analyst expectations. Corn stocks will likely stand at 745 million bushels, 4% below trade forecasts and the smallest supply since 1995.

Both corn and soy touched their daily trading limits and hit 30-month highs on the CBOT after the surprising report. Soaring grains sent livestock prices higher as the rising cost of feeding animals was expected to push up the cost of meat and dairy products.