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US Running Out of Corn
US - According to the latest figures from the US feed grains outlook, American producers are going to see tough times ahead. Lower production, strong domestic demand and lower ending stocks are going to set a trend of tight corn supply and point towards upcoming shortfalls.The 2008-09 US corn crop is projected at 12.1 million bushels, down 7% from record in 2007-08. Adding pressure is torrential rains across the US Midwest region, which has delayed corn plantings. This has made many producers anxious as out of season plantings risk lower yields. Early June is the latest producers can look at planting corn, otherwise they will need to switch to other crops.
Regardless of delayed plantings, corn yields are still forecast to be lower than last year, which will fail to meet the US 13-billion bushel demand. Ending stocks of corn are forecast to the lowest since 1995-96. A consequence of tighter supplies is higher prices, with the USDA forecasting the season-average price to be $5 to $6/bushel, well above the previous forecast of $4.10 to $4.40/bushel.
Despite lower forecast US corn output, globally coarse grain production is projected to increase slightly to 1.1 billion tonnes, due to increased corn production in Argentina, Brazil, China and EU-27.
The US corn crop is used for three main reasons, feed, fuel (ethanol) and export. The US is a huge player in the global market, producing 42.5% of the global crop and expected to account for 64% of all corn traded internationally during this marketing year. If the US corn crop declines, it affects not only the price of corn, but also the price of related products that can be substituted, including wheat, soybeans and hay.
Predictions are that the feed and feed residue element of the corn crop will be substantially lower in the 2008-09 season than 2007-08. This should cause livestock production to eventually fall, as predicted by USDA for 2009. Also, feeders will turn to distillers dried grains (DDG’s), a by-product of ethanol production, as they try and contain feed costs.
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