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Tight Supply Situation Still Driving Corn Market

13 July 2011

US - The Agriculture Department forecasts higher corn stocks in its July crop report released today compared to its June report, but economists with the American Farm Bureau Federation stress that corn supplies are still very tight and a big crop is needed to meet strong demand and build reserves to a more comfortable level.

USDA’s July World Agricultural Supply and Demand Estimates peg corn stocks at 870 million bushels for the 2011/2012 marketing year, up 175 million bushels from the June stocks estimate. Todd Davis, AFBF crops economist, said the increase is due mostly to USDA raising its harvested corn acreage estimate to 84.9 million acres in July, up 1.7 million acres from its June forecast.

"The increase in corn acreage from the June report should mean an additional 270 million bushels in corn production this year," Dr Davis explained. "USDA is now forecasting a corn crop of 13.47 million bushels, which we will need to meet very strong demand. Our supply situation is still very tight. In June, USDA showed a stocks-to-use ratio of 5 percent, which is just 19 days of supply. USDA raised its stocks-to-use ratio to 6 per cent, which is still only 24 days of supply."

Dr Davis emphasized the tight stocks situation means there is no room for any production problems this year.

"Corn farmers have faced a lot of challenges this year, from late planting to floods to drought, and a lot can happen from now until harvest," he said. "We still have a long way to go to realize a corn crop of 13.47 million bushels this year. There is a very good chance that both the production and stocks estimates will come down in USDA’s August report."

Meanwhile, Dr Davis said drought is clearly taking its toll on the US cotton crop. USDA projects that a record 30 per cent of the US cotton crop will be abandoned this year, due to historic drought conditions, mainly in Texas and Georgia.

"Our hearts go out to Texas cotton farmers," he said. "Texas produces 50 per cent of the US cotton crop and about 50 per cent of the Texas cotton crop will be abandoned because of the drought. If you farm cotton in Texas without irrigation, you’re not going to have a crop to harvest this year."

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