Fears of a possible food shortage were eased by US government data released Thursday which showed the global stockpile of corn increasing despite surging consumption of the grain to make ethanol.
"No one needs to worry about running out of corn or other feedgrains; the big number this morning was the world feedgrain supply up 17 million tonnes," said Paul Haugens, vice president for FIMAT USA.
Corn remains the chief feedstock for producing beef, pork and chicken and the US Department of Agriculture now says the supply of corn in the United States at the end of the new-crop (2007/08) marketing year on August 31, 2008, will total more than 1.5 billion bushels. That's a 33 percent increase from the projected 1.137 billion bushels of corn in storage at the end of this August.
And USDA projected global coarse grain ending stocks for 2007/08 at 137 million tonnes, up from its outlook in June for 121.5 million and above this year's ending supply of 131 million. "Even longer-term when ethanol plants really start firing up, there will not be a shortage of corn. A lot of cotton and soybean acreage will be shifted to corn and improved genetics will boost yields," said Chris Manns, president of Traders Group Inc.
The build-up of corn supplies is expected next year because US farmers planted a huge nearly 93 million acres of their land to corn, the most in 63 years, to meet the surging demand from the ethanol sector and to take advantage of the highest corn prices in 10 years.
Corn output is expected to be a record large 12.84 billion bushels this year, above the previous record of 11.8 billion produced three years ago. Corn supplies are expected to grow despite the fact that the amount of corn used to produce ethanol will increase to 3.4 billion bushels next year, up sharply from 2.15 billion this year, according to USDA data. For the first time, corn for energy production will outstrip corn exports projected at 2.0 billion bushels and will approach the amount of corn expected to be used as livestock feed at 5.7 billion bushels.
Corn futures prices on the Chicago Board of Trade were holding firm on Thursday despite the stocks buildup. "The corn numbers are bearish but there are some forecasts for hot weather next week, so that's keeping away some sellers," a trader said.
The US corn crop will be nearing the end of its important pollination or reproductive stage of development next week but a spate of hot weather then could still trim a few bushels from this year's corn crop, which would reduce next year's ending corn stockpile a bit.
Analysts and traders agreed that the food versus fuel debate will continue despite the outlook for huge corn production and a safety net of corn supplies. "Ethanol will be an easy target. The oil companies will gladly stoke the fire that we're running out of corn and food," Manns said. "The ethanol industry will have to be diligent in stating their case."