The U.S. corn surplus on Aug. 31 will be larger than analysts expected as more wheat is used to feed livestock and as farmers start the harvest early after a warmer-than-usual spring in the Midwest, the government said.
Unsold supplies at the end of the marketing year, when the harvest is normally just getting under way, will total 801 million bushels, unchanged from the March forecast and down from 1.128 billion a year earlier, the U.S. Department of Agriculture said today in a report. The average estimate of analysts surveyed by Bloomberg News was for 715 million bushels after consumption in the three months through February unexpectedly rose.
“USDA is saying that rising wheat supplies will bridge the gap in corn supplies before the U.S. harvest begins,” Roy Huckabay, an executive vice president of the Linn Group in Chicago, said before the report. “Corn supplies are tight, and that will increase attention on crop conditions and weather forecasts the next three months.”
Corn futures for May delivery fell 1.4 percent to $6.49 a bushel yesterday on the Chicago Board of Trade. The commodity has dropped 16 percent in the past year on forecasts that world wheat reserves will rise to the highest since 2002.
Larger-than-expected corn inventories may limit cost increases for processors of corn-based ethanol such as Archer Daniels Midland Co. (ADM:US) and for meat companies including Smithfield Foods Inc. (SFD:US) and Tyson Foods Inc. (TSN:US), which say animal feed made from the grain is their biggest expense.
About 4.6 billion bushels will be used for animal feed, 5 billion for ethanol and 1.7 billion for exports, the department said, all unchanged from last month’s estimates.
The USDA’s estimate of 12.358 billion bushels for the 2011 crop was unchanged and down 0.7 percent from a year earlier. It was the smallest harvest since 2008. The government is scheduled to release its first forecast for this year’s crop next month.
World corn production in the marketing year that ends Sept. 30 will total 864.97 million metric tons, little changed from 864.96 million forecast in March. A year earlier, output was a record 828.97 million tons.
Global consumption will reach 867.29 million tons, down from 869.49 million estimated last month and an increase from 848.06 million last year, the USDA said. It would be the third straight year that consumption exceeds production.
World inventories before this year’s harvest in the Northern Hemisphere will total 122.71 million tons, down from 124.53 million tons estimated in March and less than 125.02 million in the previous year. Analysts surveyed by Bloomberg News expected 122.04 million, on average.
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