Futures Outlook - An Excerpt from CRB'S Futures Market Service

USDA confirms US corn crop will be second largest ever, likely keeping corn prices under wraps

The USDA on November 10 reduced its estimate for the US corn crop by 0.7% to 12.921 billion bushels from its October estimate of 13.018 billion bushels. The USDA report was in line with market expectations and had little net impact on corn prices. The downward revision in the corn crop size was due to a cut in the yield estimate to 162.9 bushels per acre from 164.2 bushels in October. The lower yield was due to the wet weather during late fall and the very late harvest, which resulted in yield losses. However, this year’scorn yield will still be the highest ever for the US, a testament to this summer’s extremely favorable growing weather and also to improved farming and seed technology.

This summer’s US corn crop was the second largest ever, just behind the record crop of 13.038 billion bushels in 2007/08. The US needed a big crop this year due to the USDA’s projection for record corn usage this year of 12.98 billion bushels. Corn demand has been strong from most quarters, but particularly from the ethanol sector which is expected to use 4.2 billion bushels of corn this year, amounting to 32.5% of the crop.

The big crop means that the US carry-over at the end of the marketing year is expected to be 1.625 billion bushels, very close to the levels seen in the last two years. The corn stocks/use ratio is projected by the  USDA at 12.5%, which is a little tighter than the last two years but still at a relatively comfortable level. The large corn crop and decent-sized US carryover should allow corn prices to remain under wraps this winteras the market waits to gauge developments for next spring, including weather and planting intentions.

At the world level, the corn supply situation is also adequate and should help to keep a lid on corn prices. The USDA is predicting world corn production at 789.73 million metric tons (MMT), just below last year’s record of 791.92 MMT. World corn consumption will be a record 803.27 MMT, according to the USDA. Despite strong demand, the big crop will allow the global corn carry-over to remain adequate at 132.41 MMT, the second highest on record.

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