U.S. corn stockpiles at the end of next summer will probably be more than 1 percent smaller than the government forecast last month, according to several analysts, underscoring the outlook for tight supplies that will keep livestock producers’ feed costs elevated next year.
By the end of the 2011-12 marketing year in August, domestic corn supplies will total about 831 million bushels, based on the average estimate in a survey of 19 analysts conducted by Thomson Reuters before the U.S. Department of Agriculture’ next monthly Supply and Demand report.
So-called ending stocks, a closely-followed gauge of the supply cushion, would be down 12 million bushels from the USDA’s estimate last month and down 299 million bushels, or 26 percent, from the 1.13 billion bushels on hand at the close of 2010-11, based on the survey. Projected stockpiles would also be the lowest in 16 years.
The report is scheduled for release Dec. 9 at 7: 30 a.m. Central time.
Corn buyers face historically low supplies after unfavorable weather hampered this year’s U.S. crop and ethanol makers used record amounts of the grain. While the corn market has tumbled 26 percent from all-time highs near $8 a bushel in June, based on Chicago futures, prices into next summer are still expected to trade at double the levels of five years ago.
Pricey corn is prompting overseas buyers and domestic cattle, chicken and hog producers to cut back, with 2011-12 U.S. exports expected to drop to a nine-year low and feed use pegged at a 22-year low, according to previous USDA outlooks.
“Extremely high corn prices likely have rationed out some export demand,” industry analysts Steve Meyer and Len Steiner wrote in a Dec. 7 report. “In addition, reports are pouring in of higher feed wheat availability in global markets,” noting that Australia and the Black Sea region are selling wheat that’s “competitively priced” with U.S. corn.
As a result, market participants “will be paying close attention” to any USDA revisions in global supply data, Meyer and Steiner said. “It appears that analysts expect any reductions in exports to be offset by higher domestic use numbers,” either in ethanol or feed use, they said.
Rich Feltes, an analyst with R.J. O’Brien & Associates in Chicago, suspects the USDA may be overstating total U.S. corn demand in 2011-12 by about 50 million bushels, though he said it’s unlikely the agency will make an adjustment of that magnitude in the Dec.9 report.
The “jury is still out on 2011-12 U.S. corn demand, although evidence is building that U.S. exports will fall short of expectations,” offsetting possible increases in ethanol and feed use, Feltes said in a report this week.
In its November Supply and Demand report, the USDA lowered estimated 2011-12 feed and residual use for corn to 4.6 billion bushels, down 100 million bushels from a previous forecast and the lowest figure for that category since 4.46 billion bushels in 1989-90. Farm-level corn prices are expected to average $6.20 to $7.20 in 2011-12, up from $5.18 last year.
In midday trading Dec. 7, corn futures for March delivery fell 7 cents to $5.89 ½. Earlier this week, futures touched the lowest level in a year, based on the closest-to-expiration contract.
On a global level, shrinking U.S. corn supplies are being mitigated to some extent by bigger crops in Argentina and China, analysts said. Last month, the USDA projected worldwide corn production in 2011-12 at 859 million metric tons, or 33.8 billion bushels, up 3.7 percent from last year and an all-time high.
Allendale, Inc., a McHenry, Ill.-based advisor, said global corn ending stockpiles for 2011-12 may be revised about 1.2 percent higher, to 123.1 million metric tons. The Chinese government last week raised its forecast for the country’s corn crop to 191.8 million metric tons, 4 percent above the USDA’s current estimate, Allendale analyst Rich Nelson said.
In China, “this year’s production has been bolstered by both higher acreage as well as much better than expected yields,” Nelson said in a Dec. 7 e-mail. “We expect USDA to recognize some of this news on Friday’s report. Additionally, we expect a slight revision lower to U.S. corn demand.”
Still, global corn supplies are expected to remain historically low. The USDA’s estimated ending stockpiles for 2011-12 amount to about 51 days’ supply, down from 56 in 2010-11 and the lowest in at least 31 years, based on data from AgTraderTalk LLC.