U.S. corn sales fall most since ‘75

  • Bloomberg News
  • Thursday, September 26, 2013 3:09pm
  • Business

CHICAGO — Demand for U.S. corn fell the most since 1975 in the past year, leaving a bigger-than-forecast surplus stacked in silos just as farmers begin reaping what the government says will be the world’s largest-ever crop.

Domestic consumption and exports fell a combined 10 percent in the year ended Aug. 31, government data show. Total supply after the harvest starts this month will rise 24 percent to 14.537 billion bushels as fields recover from last year’s drought, according to the average of 28 analyst estimates compiled by Bloomberg. Goldman Sachs analysts say corn will drop to $4.25 a bushel in three months, or 6.1 percent less than now.

The U.S. will reap 28 percent more corn this season, doubling inventories before next year’s harvest after losing market share to shippers in Brazil, Argentina and Ukraine. Global supply is surging after prices reached a record $8.29 in 2012 and futures are heading for the biggest annual drop in at least five decades. Cheaper grain is boosting profit for Archer- Daniels-Midland, which makes ethanol from the grain, and Sanderson Farms, the third-largest U.S. poultry producer.

“Domestic utilization is stagnant, and high prices the past five years have shifted foreign demand to other suppliers,” said Michael Swanson, the senior agricultural economist in Minneapolis for Wells Fargo, the largest U.S. farm lender. “We are transitioning from tight supplies to abundant inventories, and that may result in several years of lower prices. That’s good news for everyone that uses corn.”

Futures plunged 35 percent to $4.525 on the Chicago Board of Trade this year, the biggest drop among 24 commodities tracked by the Standard &Poor’s GSCI Spot Index, which slid 1.7 percent. The MSCI All-Country World Index of equities rose 13 percent since the end of December and the Bloomberg U.S. Treasury Bond Index lost 2.4 percent.

Domestic stockpiles on Sept. 1 probably totaled 694 million bushels, more than the 661 million the U.S. Department of Agriculture estimated on Sept. 12, the Bloomberg survey of analysts showed. Demand for U.S. supplies in the next 12 months will be at least 3.2 percent below the USDA forecast because of competing supply in export markets, a lack of growth in ethanol demand and slowing expansion in meat production, Swanson said.

The U.S. share of global exports fell to 20 percent in the 12 months ended Aug. 31, from 33 percent a year earlier, government data show. The USDA says that will rebound to 30 percent this season as the U.S. crop helps boost world output by 11 percent to 956.7 million tons. The agency will update its inventory estimate on Monday at noon in Washington.

Record harvests may not mean an immediate glut of supply because U.S. growers increased their storage capacity, allowing them to stockpile grain until prices rise. On-farm storage expanded 16 percent in the decade through 2012 to almost 13 billion bushels, the most since at least 1989, USDA data show. Grain companies expanded capacity by 20 percent to 10.247 billion bushels.

There may also be plenty of space for the new crop after U.S. output fell 13 percent last year. The farmer-owned West Central Cooperative in Ralston, Iowa, has its smallest stockpiles since 1996 and 96 percent of its storage space is empty, said Roger Fray, an executive vice president.

The government estimates 31 percent of the crop is usually sold from Sept. 1 to Dec. 1. This year, farmers are in no hurry, with sales at about a third of normal for this time of year, Fray said. Soybeans are trading at the highest ratio to corn since 2009, and that may encourage farmers to store corn and sell soybeans, said Peter Meyer, a senior director for Pira Energy Group in New York.

Hedge funds and other large speculators have been betting on lower corn prices since July, with a net-short position of 104,211 futures and options on Sept. 17, Commodity Futures Trading Commission data show. One futures contract represents 5,000 bushels now valued at $22,625.

The world is less dependent on U.S. corn, which accounted for more than 67 percent of exports in 2006, government data show. Brazil and Argentina will both sell more than the U.S. for the first time ever in the marketing year that ends Sept. 30.

Midwest farmland values that reached record highs this year could drop as much as 20 percent over the next three years, mostly because of rising supplies of corn, the biggest and most- valuable U.S. crop, Rabobank said in a Sept. 19 report.

Tyson Foods, the largest U.S. meat processor, said Aug. 5 that more grain supply will cut the cost of feeding its chickens, hogs and cattle. The company, based in Springdale, Ark., will report a 27 percent jump in profit to $1.01 billion in its fiscal year ending Sept. 30, 2014, according to the mean of eight analyst estimates. The shares rose 48 percent to $28.67 since the start of January and will reach $35.40 in 12 months, the average of 10 forecasts shows.

Sanderson Farms, based in Laurel, Miss., expects feed costs to tumble by $65 million in the fourth quarter, Chief Executive Officer Joe Sanderson said in an Aug. 27 conference call. That will reduce the cost of producing a pound of chicken meat by 8 cents, compared with total costs of 40.05 cents in the third quarter, he said.

Rising corn supply signals a “very optimistic” outlook for ethanol margins for Archer-Daniels-Midland in 2014 and 2015, Chief Operating Officer Juan Ricardo Luciano said on an Aug. 6 conference call. Shares of the Decatur, Ill.-based company rose 34 percent this year.

U.S. ethanol output peaked at 13.9 billion gallons in 2011, using a record 5.021 billion bushels of corn. The USDA estimates 4.655 billion bushels were used in the year that ended Aug. 31.

Last year’s surging prices reduced demand from livestock and dairy producers that consumed about 42 percent of the nation’s corn, said Roy Huckabay, an executive vice president for the Linn Group, a brokerage operating from the Chicago Board of Trade. Feed use in the three months ended Sept. 1 totaled 331 million bushels, compared with 479 million bushels in the same period of 2011, he said.

Stockpiles of grain are getting harder to predict as growers plant and harvest earlier, seeking higher yields, and as they build more silos on their land rather than sending grain to commercial elevators, said Dale Durchholz, the senior analyst for AgriVisor in Bloomington, Ill.

Analysts on average underestimated the size of Sept. 1 inventories in four of the past six years, data compiled by Bloomberg show. In those four years, the USDA reported stockpiles on average 15 percent more than forecast.

“We are looking at rising supplies and lower prices for the next year,” Durchholz said. “The boom times for U.S. agriculture are done for a while, and no one is going to chase rallies until there is a threat to crops.”

Talk to us

> Give us your news tips.

> Send us a letter to the editor.

> More Herald contact information.

More in Business

Izaac Escalante-Alvarez unpacks a new milling machine at the new Boeing machinists union’s apprentice training center on Friday, June 6, 2025 in Everett, Washington. (Olivia Vanni / The Herald)
Boeing Machinists union training center opens in Everett

The new center aims to give workers an inside track at Boeing jobs.

Some SnoCo stores see shortages after cyberattack on grocery supplier

Some stores, such as Whole Foods and US Foods CHEF’STORE, informed customers that some items may be temporarily unavailable.

People take photos and videos as the first Frontier Arlines flight arrives at Paine Field Airport under a water cannon salute on Monday, June 2, 2025 in Everett, Washington. (Olivia Vanni / The Herald)
Water cannons salute Frontier on its first day at Paine Field

Frontier Airlines joins Alaska Airlines in offering service Snohomish County passengers.

Amit B. Singh, president of Edmonds Community College. 201008
Edmonds College and schools continue diversity programs

Educational diversity programs are alive and well in Snohomish County.

A standard jet fuel, left, burns with extensive smoke output while a 50 percent SAF drop-in jet fuel, right, puts off less smoke during a demonstration of the difference in fuel emissions on Tuesday, March 28, 2023 in Everett, Washington. (Olivia Vanni / The Herald)
Sustainable aviation fuel center gets funding boost

A planned research and development center focused on sustainable aviation… Continue reading

Helion's 6th fusion prototype, Trenta, on display on Tuesday, July 9, 2024 in Everett, Washington. (Olivia Vanni / The Herald)
Helion celebrates smoother path to fusion energy site approval

Helion CEO applauds legislation signed by Gov. Bob Ferguson expected to streamline site selection process.

FILE — Jet fuselages at Boeing’s fabrication site in Everett, Wash., Sept. 28, 2022. Some recently manufactured Boeing and Airbus jets have components made from titanium that was sold using fake documentation verifying the material’s authenticity, according to a supplier for the plane makers. (Jovelle Tamayo/The New York Times)
Boeing adding new space in Everett despite worker reduction

Boeing is expanding the amount of space it occupies in… Continue reading

Water drips from an Alaska Airlines Boeing 737 after it received a water salute while becoming the first scheduled 737 arrival Thursday, Feb. 17, 2022, at Paine Field Airport in Everett, Washington. (Ryan Berry / The Herald)
Boeing and Airbus forecast strong demand for their jets

Boeing and Airbus project more than 40,000 new jets are needed.

Hundreds wait in line to order after the grand opening of Dick’s Drive-In’s new location in Everett on Thursday, June 12, 2025 in Everett, Washington. (Olivia Vanni / The Herald)
Dick’s Drive-In throws a party for opening day in Everett

More than 150 people showed up to celebrate the grand opening for the newest Dick’s in Snohomish County.

Patrick Russell, left, Jill Russell and their son Jackson Russell of Lake Stevens enjoy Dick’s burgers on their way home from Seattle on Friday, Sept. 22, 2023 in Edmonds, Washington. The family said the announcement of the Dick’s location in Everett “is amazing” and they will be stopping by whenever it opens in 2025. (Olivia Vanni / The Herald)
Dick’s Drive-In announces details for Thursday’s grand opening in Everett

Dick’s will celebrate its second Snohomish County location with four days of festivities.

Support local journalism

If you value local news, make a gift now to support the trusted journalism you get in The Daily Herald. Donations processed in this system are not tax deductible.