USDA forecast U.S. corn shortfall

by Editor
Tuesday, June 17, 2008

The U.S. feed grains outlook for 2008-09 forecast lower production, strong domestic demand and lower ending stocks.

According to the United States Department of Agriculture (USDA) this is bad news for U.S. livestock producers, because they will undoubtedly be hit by rising grain prices.

The 2008-09 U.S. corn crop is projected at 12.1 million bushels, down 7% from record in 2007-08. Adding pressure is torrential rains across the U.S. Midwest region, which has delayed corn plantings. This has made many producers anxious as out of season plantings risk lower yields.

Regardless of delayed plantings, corn yields are still forecast to be lower than last year, which will fail to meet the U.S. 13-billion bushel demand. Ending stocks of corn are forecast to be down 45% on 2007-08, at 763 million bushels – 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 U.S. corn output, globally coarse grain production is projected to increase slightly to 1.1 billion tons, due to increased corn production in Argentina, Brazil, China and EU-27.

The U.S. corn crop is used for three main reasons, feed, fuel (ethanol) and export. The U.S. 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.

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.