In its monthly agricultural supply/demand update the US Department of Agriculture on August 10 again lowered the outlook for corn production, reflecting the continued deterioration of this year's crop due to the once-in-a-lifetime drought that affects most of the US corn belt.
The latest USDA projection lowers US corn production to 274 million tonnes (mt), down almost 40 mt from last year, and the lowest since 2006. World corn production is estimated at 849 mt, down 27 mt from last year, but 19 mt higher than 2010/2011 due to higher production from China, Brazil and Argentina.
With this large reduction in US corn supplies, higher prices are expected to ration demand during the coming year. USDA projects that total world corn use will decline about 7 mt from last year, while US total use will drop 25 mt — feed use down 12 mt, corn use for ethanol down 12.7 mt, and exports down 6.3 mt.
USDA expects world corn imports to decline by almost 7 mt, while non-US feed use will continue to grow, up 13 mt from last year to 405 mt.
Unchanged global feed grain use
From a broader perspective, world coarse grain feed use (including mainly corn, sorghum and barley) will be essentially unchanged from last year at 660 mt, compared with 658.5 mt in 2011/12.
Countries will respond to the tight corn supplies and higher prices in the coming year in different ways according the USDA estimate.
For example, Japan and South Korea imports are projected be unchanged from 2011 to 2012. China's corn imports likely will decrease by 3 mt due partly to a record domestic corn harvest of 200 mt, which is up 7 mt from last year.
Higher grain prices
Globally, all corn users will face the challenge of higher prices and the need for increased efficiency, careful risk management and creative marketing strategies during the coming year.
As the projections for US corn use demonstrate, the high prices will ration demand in all markets and in all sectors (feed, food and fuel).
Also, the relatively smaller decline in US exports compared to domestic use reflects the resilience of global feed demand.
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