March 29, 2004
US Corn Plantings Highest In 19 Years
Six-year highs in U.S. corn prices and an outlook for strong exports and ethanol demand make it likely that U.S. farmers this spring will seed the most corn acres in two decades, grain market analysts said.
The U.S. Department of Agriculture will release its annual prospective plantings report on March 31 along with quarterly stocks data showing the amount of corn on-hand as of March 1.
Analysts on average expect this year's corn plantings to come in at 80.29 million acres, above the 78.736 million seeded last year and the most corn acreage since the 1985/86 season.
The added acres were seen coming from land usually planted to wheat, sorghum and cotton, since analysts also expect soybean acreage to rise about 1 million acres this spring at 74.508 million, buoyed by 15-year highs in futures prices.
"People are not afraid of these big acreage numbers ... because our demand is so strong," said Jason Roose, an analyst with U.S. Commodities in Des Moines, Iowa.
"It's all tied together -- a weak dollar, lower prices last year, and you've just built this huge demand underneath this market."
Demand for U.S. corn has been phenomenal this year and should only get bigger, analysts said. Last year, U.S. corn production reached a record 10.1 billion bushels with record yields despite some pressure from dry weather.
Exports have been booming, helped by the weaker U.S. dollar. USDA corn export inspections through March 18 are running 27 percent ahead of last season.
Meanwhile, industrial use of corn for ethanol is rising steadily as MTBE, another additive, is phased out due to environmental concerns.
The demand has eaten away at last year's bumper harvest.
Analysts on average expect USDA to peg U.S. March 1 corn stocks at 5.275 billion bushels, just above last year's 5.132 billion.
Strong beef and pork prices -- with bacon prices setting a record high this week -- also point to solid 2004 corn feed demand.
Some analysts said any surprises in the stocks report could stem from a bigger-than-expected corn demand for ethanol.
"If they (stocks) fall short, we're looking for corn to trade upward to $3.40 nearby," Terry Reilly, an analyst with Citigroup, said of Chicago Board of Trade corn futures.
CBOT May corn was down 1/2 cent at $3.06-1/4 late on Friday.
Weaker export competition from China, the No. 2 corn exporter after the United States last year, had fed the boost in U.S. exports. Analysts see that trend continuing as China tries to cap domestic grain prices and food inflation.
South Korea returned to U.S. corn this winter, with its purchases up nearly six-fold to 1.153 million tonnes compared with a year earlier. China won that once-secure U.S. market three years ago after StarLink, a gene-spliced corn unapproved for food use, was found in U.S. shipments to Korean processors.
Analysts have penciled in record corn demand of 10.4 billion to 10.5 billion bushels for 2004/05. So even if 80 million acres are planted this spring, average yield needs to be near last year's record 142.2 bushels per acre to meet demand.
"We need record production next year to keep up with the expected demand. And by increasing acreage it will tell us what kind of a buffer we have," said Shawn McCambridge, analyst with Prudential Securities.