Heat Wave, Drought Visably Impacting Nation's Corn Supply

By CnAgri2012-06-28 19:56:06 Print

Corn supplies in the U.S. are declining at the fastest pace since 1996 as a Midwest heat wave damages the world's largest harvest for a third consecutive year. Bloomberg News reports that stockpiles were probably 3.168 billion bushels (80.47 million metric tons) on June 1, 47 percent less than on March 1, the average of 22 analyst estimates show. The worst Midwest drought in more than a decade is wilting a harvest that the U.S. Department of Agriculture says will be the biggest ever. The agency updates its inventory estimate June 29 and its production forecast two weeks later.

Futures surged 25 percent since reaching a 20-month low June 15, and Morgan Stanley expects prices to advance another 10 percent to $7 a bushel in two months if the drought persists. The rally is boosting global food costs that the United Nations estimates dropped 14 percent from a record in February 2011 and widening losses for ethanol producers including Decatur, Illinois-based Archer Daniels Midland Co.

Meanwhile, corn rallied 14 percent this month to $6.3375 a bushel on the Chicago Board of Trade on Wedneday, trailing only wheat and natural gas among 24 commodities in the Standard & Poor's GSCI Spot Index, which fell 3.7 percent. The MSCI All-Country World Index of equities rose 1.3 percent, and the dollar fell 0.8 percent against a basket of six currencies. Treasuries lost 0.2 percent, a Bank of America Corp. index shows.

The USDA forecast June 12 that pre-harvest stockpiles at the end of August would plunge to a 16-year low of 21.62 million tons. That's a 50 percent decline in two years, the most since 1990.