Bloomberg News

World Corn Supply Falls Less Than Forecast as Rain Aids South America Crop

March 09, 2012

Global corn stockpiles before this year’s Northern Hemisphere harvests will decline less than analysts expected after rain last month eased dry conditions in Brazil and Argentina, the U.S. Department of Agriculture said.

World inventories on Sept. 30 will fall 0.7 percent to 124.53 million metric tons from 125.35 million projected in February, the smallest in five years, the USDA said today in a report. Analysts surveyed by Bloomberg News expected 123.43 million, on average. Brazil’s crop was expected to be 62 million tons, up 1.6 percent from last month, while Argentina’s production forecast was left unchanged at 22 million tons.

“South America crops are a little better than people expected because the rains the past month boosted yield potential,” Roy Huckabay, an executive vice president with the Linn Group in Chicago, said before the report. “We still need to grow a big U.S. crop this year to rebuild inventories.”

The U.S. surplus on Aug. 31, the end of the marketing year, was projected at 801 million bushels (20.35 million tons), unchanged from last month and less than 1.128 billion a year earlier.

U.S. exports will total 1.7 billion bushels, unchanged from last month’s forecast and down from 1.835 billion a year earlier, the department said. Demand for corn to produce ethanol will remain unchanged at 5 billion bushels, unchanged from a month earlier and down from 5.021 billion in the previous year, according to the report.

Tighter Supply

The prospect of tighter supply may increase costs for Archer Daniels Midland Co. (ADM), the second-largest ethanol processor, and Tyson Foods Inc., (TSN) the top U.S. meat producer, which buys grain for livestock feed. Smaller reserves also could prompt farmers to increase the number of acres planted this year, boosting demand for fertilizer from CF Industries Holdings Inc., Potash Corp. of Saskatchewan Inc. and Agrium Inc.

Corn futures for May delivery yesterday fell 0.5 percent to close at $6.355 a bushel on the Chicago Board of Trade. The price has risen 7.3 percent since falling to this year’s low on Jan. 18 at $5.925.

U.S. farmers probably will plant the most corn since 1944 this year after the average price for the grain reached a record high in 2011, the USDA said on Feb. 23. A bigger harvest in the U.S., the world’s largest exporter, would help compensate for shortages in the current crop year.

The USDA estimated world production in the 2011-2012 season, which began Oct. 1, at 864.96 million tons, up from 864.11 million forecast in February and from 829.24 last year.

China (US09PRCN), the second-largest producer, will harvest 191.75 million tons, unchanged from last month, the USDA said. The country will import 4 million tons, unchanged from last month’s estimate and up from and 980,000 tons in the previous year, according to the report.

Global consumption will reach 869.49 million tons, up from 867.59 million estimated last month and more than 844.35 million tons last year, the USDA said. It would be the third straight year world consumption exceeds output.

To contact the reporter on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net

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


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