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Corn Stocks Extremely Tight

Farm Management Update, April 1996

By David Kenyon

March 1 corn stocks were estimated to be 3,799 million bushels by USDA in the March 29 Grain Stocks report. Corn feed use was 1,350 million bushels during December-February (see table). From September 1995 through February 1996, feed use was 3,121 bushels, a decline of 393 million bushels compared to the same months in 1994- 1995. This decline during the first half of the marketing year is only 42 percent of the 934 million bushel reduction needed to meet USDA's 4,600 million bushel projection. To meet the annual feed usage estimate, feed use must decline 541 million bushels during March- August. That decline will mean reducing usage by 26.7 percent compared to 1994-1995. During September-February, usage only declined 11.2 percent. Corn prices have not increased enough yet to ration out limited supplies. Corn prices will undoubtedly move higher this spring.

Table 1: Corn-feed consumption by quarters

Period 94/95 95/96 Change
Act Proj Bu. %
Year 5,534 4,6001 -934 -16.9
Sept-Nov 2,015 1,771 -244 -12.1
Dec-Feb 1,499 1,3502 -149 -9.9
Mar-May 1,164 8503 -314 -27.0
Jun-Aug 856 6293 -227 -26.5

1World Agricultural Supply and Demand Estimates, USDA, 3/12/96.
2Calculated based on Dec-Feb exports and 3/29/96 stock levels.
3Estimates based on reducing feed use by 541 millionbushels and historical usage rates during March-August.

Red meat and poultry production estimates for the April-September period are still projected to be 4 percent higher than the same period last year. Although there is beginning to be some indication of reduced poultry and swine production for this spring and summer, the cutbacks will have to be larger than those indicated to date to meet corn feed usage targets. Exports are still running at a brisk pace and will meet the annual estimate of 2,250 million bushels. Unless corn feed usage slows down compared to September-February, there will be essentially no corn stocks left by August 31. Corn prices will have to move higher to ration available supply. I would expect prices to move 25-50 cents higher before this summer.

Given these expectations, feed users need to locate and lock in available supplies for the next 60-90 days. It will be extremely difficult to find corn supplies this summer. There may be some price relief in late June and July as small grains become available. But, much corn price weakness before summer is not expected.

The March 29 Prospective Plantings report indicates producers plan to plant 80 million acres of corn in 1996. With current low stocks and trend line yields in 1996, this acreage is not enough to lower prices substantially in 1996-1997. Given current expectations, season average price in 1996-1997 would be between $3.00 and 3.50 per bushel. Less than trend line yields will generate prices above $3.50 in 1996-1997. Corn users need to seriously consider getting some price protection for the third and fourth quarter of 1996 at current price levels.

If farmers plant 82 million acres of corn and yields are greater than 140 bushels per acre, prices could be in the $2.50-2.75 range by harvest. To get these prices requires 2 million more acres and record level yields. Without more acres and record yields, corn prices are going to remain at historically high levels.

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