January 19, 2007

Latest USDA corn report shocks industry

The USDA's January estimate for corn production shocked the industry as the agency reduced the 2006 production figure to 10.535 billion bushels, still the third largest in history, a figure nearly 1 billion bushels less than the USDA estimate in August.

The USDA cut its outlook for the 2006-07 corn crop by 183 million bushels from its December prediction of 935 million. It now expects ending stocks of 752 million bushels. The final estimate of the 2006 production also led to aggressive corn scrambling via the cash markets, futures and options markets.

With end users scrambling for supplies, the market would have to ration the crop forcing prices higher. This would also raise the price for new corn crop in an effort to entice producers to plant more corn acres in 2007 than in 2006 to meet the record demand base of corn.

With demand forecast at 11.760 billion bushels, US producers would have to plant at least 10 million more acres in 2007 to begin to rebuild the carryover stocks and ensure the US does not run out of corn.