July 14, 2011

 

US corn, soy supplies to hit 15-year low

 

 

The US will have a 24-day supply of corn and a 22-day supply of soy by the end of the growing year, said USDA.

 

Traders worried about early fall supplies at 15-year lows responded by pushing the bushel prices for this year's crops up US$0.25 to US$6.58 for December corn and US$0.11 to US$13.58 for November soy.

 

Those prices, on paper, would put more than US$23 billion in cash into Iowa's economy, up from US$17.9 billion in cash for those two crops last year, according to USDA figures.

 

Analyst Arlan Suderman looked abroad and said, "The real story is that the USDA forecast the global corn supply to 48 days. That reflects the tightest global corn stocks of the past 38 years."

 

Export demand for US corn has been strong this year, and the markets have been seized by regular reports of purchases by China, listed by the USDA as "unknown destinations."

 

China is known to be suffering from both food inflation and a potential shortage of corn to feed its more than 445 million hogs - almost seven times the US supply.

 

The US hog markets have gained 12% this month on reports that China had made a major purchase of pork.

 

A Chicago trader, Dennis Smith, expressed doubts about the USDA analysis and worried that demand for corn will outstrip supply this year and next, despite a forecasted US crop of 13.47 billion bushels this year.

 

A USDA report said there would be 870 million bushels of corn in storage as of September 1, less than the 930 million-plus bushels expected by grain traders.

 

A year ago, surplus stocks stood at about 1.3 billion. In past years, surpluses have reached as high as four billion bushels.

 

Iowa farmers are likely to harvest 13.75 million acres for corn this year, the USDA said, up from 13 million last year.

 

At historic yield levels, that would produce an Iowa crop close to 2.5 billion bushels, up from 2.1 billion bushels in a rain-damaged 2010 crop year.

 

Nationally, farmers have planted 92 million acres of corn, up from 88 million last year. The national yield is pegged by the USDA at 158 bushels per acre.

 

Ethanol producers and livestock feeders have worried this year about dwindling corn supplies in August and September before the new harvest, which will likely be later this year than in 2010 because of later planting.

 

Grain prices have risen sharply in the last 12 months as supplies have dwindled from 1.8 billion in mid-2010 to less than 700 million bushels through last spring.

 

The USDA said Tuesday (Jul 12) it expects corn prices through 2012 to be US$5.50 to US$6.50 per bushel.

 

Despite a planting season made difficult by wet weather and lingering cold, the USDA said Monday that the US crop is almost 70% good or excellent. Iowa's crop is rated 82% good or excellent.

 

Suderman said traders will focus on the next month's weather, which is crucial for pollination.

 

"Traders will focus on demand news and crop-growing conditions on days when outside market fears abate," Suderman said. "Ultimately, the market will bring supply and demand into balance, but it will likely continue to be a rough road getting there."