Drought, increased demand responsible for stockpile reduction, say analysts
U.S. corn prices capped their biggest rally since July 20, 2012, on January 11, rising 4.2 percent over five straight days, the first weekly rally since November 30, 2012, according to reports. Corn futures for March delivery advanced 1.4 percent to close at $7.0875 per bushel on January 11 on the Chicago Board of Trade, the biggest gain since December 14, 2012.
The unexpected numbers are due to a more significant drop in corn stockpiles than previously forecast, due to the drought-reduced harvest and rising demand for livestock feed, according to analysts. Inventories on December 1, 2012, were 8.03 billion bushels (204 million metric tons), 17 percent less than the 9.647 billion bushels held in 2011, said the U.S. Department of Agriculture in its latest report. Supplies held in farmer grain bins fell 26 percent from 2011 numbers to the smallest for that time of year since 1995. The USDA said meat and poultry output will be 1.4 percent larger than forecast in December 2012.
The corn harvest totaled 10.78 billion bushels, said the USDA, up from 10.725 billion estimated in December 2012 but down from 12.36 billion bushels harvested in 2011 and the lowest in six years. Analysts expected 10.65 billion bushels, on average. Consumption in the three months through November 2012 was 3.74 billion bushels, down from 3.843 billion bushels in 2011. Exports will total 950 million bushels in the marketing year that began September 1, 2012, according to the report, compared with 1.15 billion bushels forecast in December 2012 and 1.543 billion bushels in 2011.
A record crop in Argentina and a higher harvest in Brazil are unable to replenish stockpiles due to their use during the drought, according to the United Nations. “It is too early to talk about a full recovery in production, stocks and a decline in international prices,” said Liliana Balbi, a senior economist at the UN’s Food & Agriculture Organization. It will take both a recovery in output in the U.S. and bumper crops in China and Europe to ease the supply concerns, she said.
Global inventories are expected to drop 12 percent to a six-year low of 116 million metric tons before the 2013 Northern Hemisphere harvest, according to the USDA.