U.S. Corn Surplus Estimate Raised 5% on Slowing Global DemandJeff Wilson
U.S. corn stockpiles before the next harvest will be 5 percent larger than forecast a month ago, and more than analysts expected, as demand slows, the U.S. Department of Agriculture said.
Inventories will total 632 million bushels (16.06 million metric tons) on Aug. 31, up from 602 million forecast in January and less than 989 million bushels a year earlier, the USDA said today in a report. The average estimate of 31 analysts in a Bloomberg survey was 616 million. Corn futures have plunged 16 percent since reaching a record in August as global supplies improved and high prices slowed demand for U.S. exports and ethanol.
Larger inventories may reduce costs for hog processor Smithfield Foods Inc. and poultry producer Sanderson Farms Inc., which say corn-based animal feed is their biggest expense. Ethanol producers such as Poet LLC and Archer-Daniels-Midland Co. may also see lower expenses. Last year, about 41 percent of the crop was used to make fuel, topping the amount turned into animal feed -- 37 percent -- for a second straight year.
“Corn demand has slowed, and the USDA consumption forecast is probably still too high,” Randy Mittelstaedt, the director of research for R.J. O’Brien & Associates in Chicago, said before the report. “Prices will have to fall to improve margins for livestock and ethanol producers,” especially with the plentiful supplies of cheaper grains available overseas, he said.
Corn futures for March delivery rose 0.2 percent to $7.12 a bushel at 9:23 a.m. on the Chicago Board of Trade. On Feb. 1, the grain reached $7.4625, the highest since Dec. 7.
U.S. exporters will sell 900 million bushels of corn in the year that ends Aug. 31, down from 950 million forecast last month and the lowest since 1972. Last year, exporters shipped 1.543 billion bushels. Sales since Sept. 1 are 52 percent behind a year earlier, USDA data show.
An estimated 4.5 billion bushels will be used to produce ethanol, unchanged from the January forecast and less than 5.011 billion in the previous year, the USDA said. Feed demand was forecast at 4.45 billion bushels, also unchanged from a month ago and down from 4.548 billion a year earlier.
The farm-gate price in the current marketing year will average $7.20 a bushel, compared with $7.40 estimated a month ago and $6.22 last year, the USDA said.
World output in the crop year that began Oct. 1 will be 854.38 million tons, up from 852.3 million forecast a month ago and down from 882.47 million last year, the USDA said. Global consumption is forecast to fall to 867.34 million tons from 879.39 million last year.
Worldwide inventories at the end of the marketing year will be 118.04 million tons, up from 115.99 million predicted a month ago, and down from 131.01 million a year earlier, the USDA said. Analysts expected 115.57 million, on average.