Bloomberg News

U.S. Corn Supply Bigger Than Expected as Feed Demand Declines

June 30, 2011

June 30 (Bloomberg) -- U.S. corn inventories at the beginning of this month were larger than analysts expected, signaling demand may be slowing from livestock producers as feed costs climb. Soybean 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 U.S. Department of Agriculture said in a quarterly report on grain stockpiles. Twenty-five analysts in a Bloomberg News survey expected 3.29 billion, on average. Supplies were still down 15 percent from 4.31 billion bushels a year earlier, the USDA said.

Corn prices are up 89 percent 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 $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 Shawn McCambridge, the senior grain analyst for Prudential Bache Commodities LLC. “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 show.

Corn futures for December delivery fell 2.5 cents, or 0.4 percent, to $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 U.S. is the world’s largest corn grower and exporter.

Soybean stockpiles left over from last year’s harvest totaled 619.1 million bushels as of June 1, up 8.4 percent from 571.1 million a year earlier, the USDA said. Analysts expected inventories of 592 million bushels, on average.

Bigger-than-expected soybean inventories signal demand is slowing for U.S. shipments, said Dale Durchholz, a senior market analyst at AgriVisor LLC in Bloomington, Illinois. In the four weeks ended June 16, export sales were down 57 percent from the same period a year earlier, USDA data show.

“Processing demand for beans is not going to be very good,” Durchholz said. “We’re finding more competition in Asia, with more meal coming out of India and South America.”

U.S. stockpiles of wheat, including all varieties, totaled 861 million bushels as of June 1, down 12 percent 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 U.S. crop, valued at $66.7 billion in 2010, followed by soybeans at $38.9 billion, government figures show. Wheat was fourth at $13 billion, behind hay.

--Editors: Daniel Enoch, Patrick McKiernan.

To contact the reporters on this story: {Whitney McFerron} in New York at wmcferron1@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net.


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