Corn pile biggest since 1994; record crop overwhelms use
By Jeff Wilson
Inventories on Dec. 1, the first tally since the harvest was complete, probably totaled 10.764 billion bushels (273.4 million metric tons), 34 percent more than a year earlier, according to the average of 24 analyst estimates in a Bloomberg survey. The biggest gain for that date since 1994 signals ample supplies may extend the slump in March futures by 10 percent to $3.75 a bushel, according to Newedge USA’s Dan Cekander.
Reserves are recovering after a drought in 2012 sent prices to a record, sparking a surge in output from the U.S. to Brazil and Ukraine. Farmers probably harvested more corn than the government forecast last month, expanding a global glut, separate surveys showed. Corn futures tumbled 40 percent last year, leading a slump in commodity prices that helped send global food costs down 14 percent from an all-time high in 2011.
“We have moved away from a supply deficit after the 2012 U.S. drought to one of surplus corn supplies,” said Bill Tierney, the chief economist for AgResource Co. in Chicago. “It will take two or more years for demand to catch up to more- abundant inventories.”
Corn futures that reached a record $8.49 in 2012 tumbled last year by the most on record going back to 1960 and more than any of the 23 other commodities tracked by the Standard & Poor’s GSCI Spot Index, which slid 2.2 percent. The MSCI All-Country World Index of equities advanced 20 percent in 2013, while the Bloomberg U.S. Treasury index slid 3.4 percent.
Agricultural prices are declining as world production of corn, soybeans and wheat surged to the highest ever. The S&P GSCI Agriculture Index of eight crops tumbled 22 percent last year, the most since 1981. Last month, Deutsche Bank joined JPMorgan Chase and Morgan Stanley in cutting back on commodity trading after investors pulled a record $36.3 billion from funds linked to raw materials over the previous year.
The 2013 U.S. corn crop probably totaled 14.06 billion bushels, a survey of 30 analysts showed, up from a December estimate by the U.S. Department of Agriculture of 13.989 billion and 30 percent more than in 2012. Chris Gadd, an analyst Macquarie Group in London, said yesterday that the total probably reached 14.255 billion, up 32 percent from 2012, mostly because of better yields and a higher percentage of harvested acres.
The global surplus before this year’s harvest on Oct. 1 will total 163.08 million tons, up from a government forecast of 162.46 million, a survey of 15 analysts showed. The USDA will update its estimates in Washington tomorrow at noon.
Low prices may help spur global demand, which is forecast to increase for an 18th straight year to a record 936.73 million tons, up 44 percent from a decade ago, USDA data show. Rising incomes in emerging markets are boosting meat buying and increasing the use of corn to feed cattle, hogs and poultry.
Based on current estimates of U.S. production in 2013 and the Dec. 1 inventories, domestic corn usage in the first quarter would be about 4.13 billion bushels, the most ever. Ethanol demand is forecast to rebound 6.5 percent this year to 4.95 billion bushels, and feed use will surge 20 percent to 5.2 billion bushels, USDA data show.
China, the world’s second-largest grower, will more than double imports to a record 7 million tons as it expands stockpiles with cheaper grain, the USDA said. As of Dec. 26, China bought 5.18 million tons of U.S. corn for delivery before Aug. 31, more than double a year earlier, government data show.
Prices may rebound to $5.25 this year, from $4.16 Thursday, Byron Wien, the vice chairman at Blackstone Advisory Partners in New York, said in a report on Jan. 6.