October 3, 2011
USDA's quarterly report showed a larger-than-expected US corn stock estimate of 1.128 billion bushels as of September 1, while corn usage was at 2.54 billion bushels, 2.4% below demand for the same period a year ago.
The corn supply projection was up 22.6% from its forecast earlier in the month.
Corn inventories have been forecast to fall to 15-year lows most of the last year, helping to push prices to record level this summer. Even with the increase, supplies stand at an eight-year low and 34% below ending inventories a year ago.
Friday USDA's data also signalled consumption is weakening. Analysts said the largest pullback was among livestock and poultry producers, who relied on alternative feeds such as wheat.
Livestock demand generally gobbles up roughly 40% of the US corn crop each year. Another 40% or so is used to make ethanol, with the remainder sold to foreign buyers overseas.
The USDA's data imply feed and residual use for quarter dropped to a record low for the quarter of about 440 million bushels. That suggests more farmers fed their cattle with wheat and dried distiller grains, a byproduct of ethanol production, instead of corn.
The USDA will likely increase its forecast for corn inventories as of September 1, 2012, because Friday's estimate indicates more corn than expected will be left over from the past year. The USDA next month may increase its outlook for the coming year more than 30% from its September forecast of 880 million bushels, barring any changes to the demand outlook.
"Without strong corn for feed demand, there'll be a little bit more corn to work with for the increased demand for corn to ethanol usage or to meet export demand for the next six months," analysts said.
The government in Friday's report estimated wheat stocks were larger than expected at 2.15 billion bushels, while soy stocks fell below expectations to 215 million bushels.
In other news, the USDA, in a separate report, said farmers were expected to harvest 2.008 billion bushels of wheat this year, down from its previous prediction of 2.077 billion bushels. A reduction in the forecast for spring wheat is largely behind the cut, with the government cutting its output forecast 11% to 462 million bushels due to wet weather.
The USDA said spring wheat yields dropped in all growing states except for Idaho, Oregon and Washington. As a result, the USDA lowered its national average estimate for spring wheat yield to 38.3 bushels per acre and cut the estimate for average yield of all US wheat to 43.9 bushels per acre, down from a previous prediction of 45.2 bushels per acre.