Corn Stockpile Estimates Cut by USDA for 2012

Projections for corn stockpiles in the United States has been lowered by the U.S. Department of Agriculture for 2012.

The downwardly revised U.S. corn stockpile estimates come from the continuing dry weather in South America, especially Argentina, which will probably result in inventories being down because of exports going up as countries gravitate to the American corn supply to make up for the shrinking South American corn yield.

Officials at the USDA slashed expected 2012 domestic corn inventory to 801 million bushels, a drop of 5.3 percent.

Argentina corn production estimates were cut by the USDA to 22 million metric tons, a decline of 15 percent. Brazil, which analysts had believed would also have corn production estimates lowered by the USDA, was kept the same, although that could be downwardly revised as the impact of weather conditions on the corn yield are clearer.

Since the middle of December, corn prices have climbed about 10 percent, in response to the first news reports dry weather was having a significant impact on the South American corn crop.

The second-largest producer of corn in the world, behind the United States, is Argentina.

Corn Supplies Tight on Record Demand

Corn and soybean supplies will remain tight this year even as increased plantings set the stage for record or near-record harvests, U.S. Department of Agriculture chief economist Joe Glauber said Feb. 24.

Exports and ethanol demand are expected to grow, keeping corn prices near historic highs and squeezing profit margins for beef, dairy and pork producers, Glauber said during an address at the USDA’s annual Outlook Forum in Arlington, Va.

“Unless this year’s weather is better than normal or plantings increase more than expected, stock levels for corn and soybeans should see only modest rebuilding in 2011-12,” Glauber said. “This will likely mean continued volatility in those markets.”

Corn futures in Chicago rallied 52 percent last year as the U.S. harvest produced weaker than expected results and prices continued higher in 2011, reaching a 31-month high near $7.25 a bushel earlier this week.

Rapidly escalating feed costs are an increasing concern for beef and pork producers, who in early 2010 returned to profitability after the 2008-09 recession contributed to deep losses.






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Record Corn Crop Won't Solve Supply Challenges

Corn supplies will stay tight in the U.S., the largest grower and exporter, even as greater planting spurs record production, the U.S. Department of Agriculture’s chief economist said. Soybean and cotton crops may also increase.

Farmers will harvest a record 13.73 billion bushels of corn this year, up from 12.447 billion last year, on 92 million planted acres, Joe Glauber, the economist, said today at a USDA forum near Washington. Greater demand for livestock feed and ethanol will limit gains in stockpiles next year, after dropping to the lowest level since 1996, he said. Prices are up 80 percent in the past year on the Chicago Board of Trade.

“Despite an increase in acres, the corn market is going to remain tight,” Glauber said. “It points to the fierce competition for acreage this spring.”

Tighter supplies helped boost global food costs by 25 percent last year, reaching the highest ever last month, according to the United Nations. Rising demand also is helping to boost net-farm income in the U.S. by 20 percent this year to a record $94.7 billion, the USDA said earlier this month. U.S. farm exports will jump 25 percent to a record $135.5 billion in fiscal 2011, Glauber said today.






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Hot, Dry China Weather Offering Corn Futures Support

The potential of low supply in the United States has corn prices pushing up, and add to that the hot, dry weather in China, and you have a couple of factors working together to offer corn prices support.

Although not proven yet, the perception that corn supplies will not be near as high as estimated has drawn traders to the market, and pushed up corn prices as a result.

For China, they could end up buying corn from the U.S. if the weather has indeed been as devastating on the corn crop in China as thought.

So for now, corn has entered into a bullish stage, at least until a firmer grip on supply is confirmed either way.