Stepped-up U.S. corn plantings still may not ease tight supplies

U.S. farmers are expected to boost corn seedings by more than 4 percent this year, according to recent government estimates, but analysts say that still may be insufficient to alleviate tight supplies and forestall a record price rally.

Farmers will plant an estimated 92 million acres to corn this spring, up from 88.2 million acres last year, the U.S. Department of Agriculture said in a report earlier this month. With corn prices currently trading near $7 a bushel, the highest in over two years, farmers have plenty of motivation to plant more of the crop, analysts said.

“Evidence is mounting that 2011 U.S. corn acreage, weather permitting, will advance substantially,” Rich Feltes, vice president of research with R.J. O’Brien & Associates, said in a report yesterday.

The USDA is expected to release updated acreage and supply and demand projections during its annual Agricultural Outlook Forum Feb. 24-25 near Washington, D.C.

“Given the current tight old-crop U.S, supplies for corn and soybeans, these numbers will be watched closely to see where the USDA anticipates producers will be shifting their acres to corn, soybeans, spring wheat, or cotton this spring,” Jerry Gidel, an analyst with North America Risk Management Services, said in a recent report.

Upcoming USDA projections will offer some insight into the outlook for grain supplies and feed costs for livestock producers. Beef, dairy and pork producers have already watched feed costs soar as corn rallied 52 percent last year following a lower than expected U.S. harvest, and some traders and analysts say prices may reach records this year.

U.S. corn stockpiles at the end of the 2010-11 marketing year Aug. 31 are expected to fall to the lowest levels since 1996. While the expected increase in corn acreage should increase supplies, assuming favorable growing weather, livestock feeders still face stiff competition from exporters and ethanol makers for the country’s biggest crop.

Additionally, high prices have encouraged more wheat planting. Farmers seeded 57 million acres to wheat this year, up 6.3 percent from last year, the USDA estimated. Soybean seedings are expected to rise 0.4 percent, to 78 million acres.

The jump in wheat plantings “reinvigorated concerns about having enough area to also expand U.S. corn and soybean plantings adequately to reduce the current tightness in these crops,” Gidel said.

Livestock feeders may receive some relief from rising feed costs if the corn market’s sharp sell-off yesterday develops into a longer-term slide, analysts said.

In late morning trading, March corn futures traded on CME Group in Chicago rose 4 ¾ cents to $6.84 ½ a bushel. March futures yesterday tumbled the daily, 30-cent limit as escalating tensions in the Middle East sparked heavy selling by speculators.

Early in yesterday’s trading, March futures touched $7.24 ¼, the highest price for a closest-to-expiration contract since July 2008. Corn futures reached a record $7.65 in June 2008.

(Source: http://www.dairyherd.com/dairy-news/latest/Stepped-up-US-corn-plantings-still-may-not-ease-tight-supplies.html)