Traders have expected the cold, wet spring in the eastern Corn Belt and northern Plains to cut into corn plantings, but seeing lower acreage in a USDA report still seemed to come as a surprise.
is the story,” says Ben Parks, risk management consultant at INTL FCStone, Kansas City.
Corn futures surged around 20 cents in response to the report.
“I think the trade was surprised with that,” says Parks. USDA analysts normally make acreage revisions in the Acreage report at the end of June. “It's been historically very rare for USDA to reduce acreage in the June WASDE,” says Parks. He doesn't expect a further reduction for corn in the Acreage report.
USDA analysts also pared 400,000 acres from their projections for harvested acreage because of flooding
in the lower Ohio and Mississippi River valleys in May and the Missouri River valley in June.
Projected national average yield of 158.7 bushels per acre, unchanged from last month's estimate, would produce a crop of 13.2 billion bushels, says USDA. Even though the projected crop is down 305 million bushels from last month, notes USDA, it is “still a record, and up 753 million from 2010-11.”
Projected 2011-12 demand for food, seed, industrial, and export markets held steady from May, but analysts reduced their projection for feed demand in 2011-12 by 100 million bushels.
Ending stock of corn likely will fall to 695 million bushels for 2011-12, off from 730 million this year and equal to only 5.2% of the year's use, USDA projects.
“With the carryout down to 695 million bushels, that just leaves us in another year which is going to be all about price rationing,” says Charles Soule, analyst at Country Hedging, on a Minneapolis Grain Exchange conference call. He expects December corn futures to trade mostly in a range of $7 to $8 per bushel.
Noting that USDA analysts left projected corn yields unchanged from last month, he says, “What they do on yields later on will be interesting to see.”
Prices may ration U.S. exports, “but there are not a lot of alternatives to buy corn around the world.,” says Soule. He notes that USDA analysts did not increase projected ethanol use of corn. “I think [rationing] will probably come in domestic feeding and maybe a little on exports.”
Global stocks down
Outside the United States, USDA says lower barley production in Europe and lower beginning stocks in China more than offset increased corn production in China. Feeding and industrial use both are rising in China, leading to lower stocks there at the end of 2011-12.
“Global corn ending stocks for 2011-12 are projected down sharply this month, falling 17.3 million tons mostly reflecting the usage revisions in China,” says USDA. “Global corn stocks are projected at 111.9 million tons, the lowest since 2006-07.”