Stocks-to-use ratio remains low
Demand for corn continues to deteriorate, but the stocks-touse ratio remains at a nearrecord low globally and in the U.S. USDA has dropped feed usage by a total of 850 million bushels in its last two World Agricultural Supply and Demand Estimates (WASDE) reports. In September, the agency
increased new-crop feed demand by 75 million bushels in light of an early harvest.
"We are still looking at one of the tightest stocks levels ever, right behind 1995–96" says Chad Hart, agricultural economist at Iowa State University. At 733 million bushels, the 2012–13 carryout represents a 6.5% stocks-to-use ratio. "We like it to be above 10%, and comfortable is 12% to 14%," Hart says.
"The nation’s beef herd
is now at a 60-year low,
something other countries
The ideal world stocks-to-use ratio is 14.3%; typically when U.S. stocks are in the 12% to 14% range, world stocks are closer to 20%. "The global stocks-to-use ratio has been tightening, and almost half of the global stocks are held in China," Hart says. "China is still pulling corn into its
market. It isn’t putting corn onto the world market."
Corn shipments to China in July rose 36% from June levels, according to customs data compiled by
Bloomberg. China’s corn imports are on track to reach a record high this marketing year, besting 1995–96 imports of 4.3 million tons.
Less Livestock. Back-to-back drought years in Kansas, Oklahoma, Texas and New Mexico have thinned the nation’s beef herd, and beef prices are starting to climb. The nation’s beef herd is now at a 60-year low, something other countries have noticed. If current trends in beef imports continue, the U.S. could import more beef in 2012 than it exports, which hasn’t happened since 2009. The beef herd takes years to thin and years to recover, Hart says.
Soaring corn and soybean prices have also convinced the nation’s hog and dairy producers to send more pigs and cull cows to slaughter. Bob Cropp, dairy economist with the University of Wisconsin, says high feed costs are forcing some dairy producers out of business. Others will sacrifice a few pounds of milk and reduce the amount of corn in the ration to better their bottom line.
USDA left harvested acreage and corn use for ethanol unchanged in its September WASDE report. In the August WASDE report, the agency lowered its estimate for corn use in the ethanol sector from 4.9 billion bushels to 4.5 billion.
"Corn producers are seeing great prices, the best they’ve ever seen," Hart says. He advises producers to protect those prices with a put option or hedge.
For producers who have corn left to market, Hart suggests letting it go early, particularly if it has quality issues. "Don’t just put it in the bin and think you’ll get a higher price later," he says. "This will be a difficult crop to store." Both toxins and molds will be an issue. Light test weight corn can spoil rapidly.