July 1, 2011


US corn supply tops estimates as livestock-feed demand rises



US corn inventories at the beginning of this month were larger than analysts expected, signalling that demand may be slowing from livestock producers as feed costs climb.


Soy and wheat stockpiles were also bigger than predicted. Corn inventories remaining from last year's harvest totaled 3.67 billion bushels as of June 1, the USDA said in a quarterly report on grain stockpiles. Twenty-five analysts expected 3.29 billion, on average. Supplies were still down 15% from 4.31 billion bushels a year earlier, the USDA said.


Corn prices are up 89% in the past year on the Chicago Board of Trade after adverse weather cut the 2010 harvest and demand surged from ethanol producers and livestock farmers. The July contract touched a record US$7.9975 a bushel on June 10, spurring some livestock farmers to substitute other grains for corn in feed rations.


Livestock "feeders were using cheaper wheat supplies or other alternatives to replace corn," said an analyst. "Margins have tightened up, so we may be seeing some liquidation take place in livestock."


July corn was 56.75 cents more expensive than July wheat yesterday, exchange data showed.


Corn futures for December delivery fell 2.5 cents, or 0.4%, to US$6.505 a bushel yesterday on the Chicago Board of Trade. Prices have declined this month on concern that Greece's debt crisis will spread, curbing demand for commodities. The US is the world's largest corn grower and exporter.


Soy stockpiles left over from last year's harvest totalled 619.1 million bushels as of June 1, up 8.4% from 571.1 million a year earlier, the USDA said. Analysts expected inventories of 592 million bushels, on average.


Bigger-than-expected soy inventories signal demand is slowing for US shipments, said an analyst. In the four weeks ended June 16, export sales were down 57% from the same period a year earlier, USDA data show.


"Processing demand for beans is not going to be very good," the analyst said. "We're finding more competition in Asia, with more meal coming out of India and South America."


US stockpiles of wheat, including all varieties, totalled 861 million bushels as of June 1, down 12% from 976 million a year earlier, the USDA said. Analysts expected 823 million. About 1.425 billion bushels were in storage on March 1.


Today's USDA estimates are based on a survey of 700,000 farmers and 9,000 commercial grain facilities.


Corn is the biggest US crop, valued at US$66.7 billion in 2010, followed by soy at US$38.9 billion, government figures show. Wheat was fourth at US$13 billion, behind hay.

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