Corn Price Jumps To 3-Year High As USDA Slashes Inventory Estimates

Corn Futures Climb to Three-Year High as USDA Slashes Inventory Estimates (Bloomberg, Jun 9, 2011):

Corn jumped to the highest price in almost three years after the U.S. Department of Agriculture forecast tighter supplies, as adverse weather hurt crops.

U.S. stockpiles before the start of the 2012 harvest may fall to 695 million bushels, the lowest since 1996, even as farmers collect a record crop, the USDA said. World inventories are projected to drop next year to the lowest since 2004. Prices have more than doubled in the past year as global output trailed gains in demand for livestock feed and biofuels.

“Today’s report should be viewed as very bullish,” Bill Gary, the president of Commodity Information Systems in Oklahoma City, said in a report to clients. Corn “ending stocks were forecast at the second tightest level in history,” based on reserves to cover daily usage, he said.

The rally is boosting costs for meat producers including Tyson Foods Inc. (TSN) and ethanol makers such as Poet LLC. Global food prices climbed in nine of the past 11 months, touching a record in February. Food-price inflation, high unemployment and corruption spurred unrest in northern Africa and the Middle East this year, ousting leaders in Tunisia and Egypt.

Corn futures for July delivery rose 21.5 cents, or 2.8 percent, to close at $7.855 a bushel at 1:15 p.m. on the Chicago Board of Trade, after touching $7.93, the highest since June 30, 2008.

The U.S. corn harvest may be 2.3 percent smaller than forecast in May after unusually heavy Midwest rains left muddy fields too wet for sowing seeds, the government said today.

Fewer Acres

Planted acreage was forecast at 90.7 million acres, down 1.6 percent from last month’s projection. In a survey released in late March, farmers indicated they planned to sow 92.178 million acres with corn this year. The USDA will update its estimate of farmers’ intentions in a report on June 30.

The USDA forecast the yield from this year’s crop at 158.7 bushels per acre, unchanged from a month ago and up from 152.8 bushels last year.

The department also projected record U.S. farm prices for next year, with corn fetching $6 to $7 a bushel on average in the year that begins Sept. 1, up from last month’s forecast of $5.50 to $6.50 and the current-year’s average of $5.20 to $5.50.

“This is a very, very tight stocks situation, representing just 19 days of supply,” Todd Davis, an economist at the American Farm Bureau Federation in Washington, said today in a statement. “Farmers can still make up for planting delays brought on by flooding, but they clearly need cooperative weather in July and August to make a good corn crop.”

Rising Demand

U.S. farm exports will jump to a record $137 billion in the year ending Sept. 30 as companies including Bunge Ltd. and Archer Daniels Midland Co. expand shipping capacity to meet rising demand, the USDA said last month. The total would be 26 percent higher than last year’s $108.7 billion, and more than the previous record of $114.9 billion in 2008. The U.S. is the world’s leading exporter of corn.

Chinese corn consumption in the marketing year that begins Oct. 1 is forecast to jump 5.2 percent to a record 181 million metric tons, outpacing projected record production of 178 million. China, the biggest buyer of soybeans, became a net importer of corn last year for the first time since 1996.

“Chinese demand for corn is significant,” said Sal Gilbertie, the president of Teucrium Trading LLC, which a year ago launched an exchange-traded product linked to futures of the grain. “This is the third year in a row of tightening corn supplies at a time when weather is very erratic.”

Corn is the biggest U.S. crop, valued at $66.7 billion in 2010, government figures show.

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