Thursday, February 24, 2011

Corn Supplies Tight on Record Demand

Corn and soybean supplies will remain tight this year even as increased plantings set the stage for record or near-record harvests, U.S. Department of Agriculture chief economist Joe Glauber said Feb. 24.

Exports and ethanol demand are expected to grow, keeping corn prices near historic highs and squeezing profit margins for beef, dairy and pork producers, Glauber said during an address at the USDA’s annual Outlook Forum in Arlington, Va.

“Unless this year’s weather is better than normal or plantings increase more than expected, stock levels for corn and soybeans should see only modest rebuilding in 2011-12,” Glauber said. “This will likely mean continued volatility in those markets.”

Corn futures in Chicago rallied 52 percent last year as the U.S. harvest produced weaker than expected results and prices continued higher in 2011, reaching a 31-month high near $7.25 a bushel earlier this week.

Rapidly escalating feed costs are an increasing concern for beef and pork producers, who in early 2010 returned to profitability after the 2008-09 recession contributed to deep losses.

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Vilsack Clueless on U.S. Corn, Ethanol

The United States "can do it all" -- turn more corn into ethanol without running short of food, Agriculture Secretary Tom Vilsack said on Thursday, as oil prices soared and the government raised its forecast of food price increases this year.

"There is no reason for us to take the foot off the gas," said Vilsack, referring to biofuels at a two-day Agriculture Department conference on the outlook for this year's crops. "We can do it all."

A record 5 billion bushels of corn will be used to make ethanol in the marketing year opening on Sept 1, up slightly from this year, said USDA. It also forecast food prices will rise 3.5 percent this year -- double the U.S. inflation rate.

Former president Bill Clinton, who spoke shortly after Vilsack, said there were stark trade-offs in using crops to make fuel. They affect the food supply in other nations as well as decisions around the world on where to grow crops.

"I think the best thing to say is we have to become energy independent but we don't want to do it at the cost of food riots," said Clinton. "The more biofuels we grow here, the less crops we have to put on the international market."

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Record Corn Crop Won't Solve Supply Challenges

Corn supplies will stay tight in the U.S., the largest grower and exporter, even as greater planting spurs record production, the U.S. Department of Agriculture’s chief economist said. Soybean and cotton crops may also increase.

Farmers will harvest a record 13.73 billion bushels of corn this year, up from 12.447 billion last year, on 92 million planted acres, Joe Glauber, the economist, said today at a USDA forum near Washington. Greater demand for livestock feed and ethanol will limit gains in stockpiles next year, after dropping to the lowest level since 1996, he said. Prices are up 80 percent in the past year on the Chicago Board of Trade.

“Despite an increase in acres, the corn market is going to remain tight,” Glauber said. “It points to the fierce competition for acreage this spring.”

Tighter supplies helped boost global food costs by 25 percent last year, reaching the highest ever last month, according to the United Nations. Rising demand also is helping to boost net-farm income in the U.S. by 20 percent this year to a record $94.7 billion, the USDA said earlier this month. U.S. farm exports will jump 25 percent to a record $135.5 billion in fiscal 2011, Glauber said today.

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