Corn Rationing in 2008 ?
Posted by Big Gav in corn
The Houston Chronicle reports that corn plantings in the US have dropped 7% since last year, leading to (over the top) speculation about corn rationing this year. Presumably this is related to the ethanol price bust, but no explanation is given (I guess its also possible that rising fuel and fertiliser costs are a factor). On the other hand, soy plantings have risen 18%.
A BB&T Capital Markets analyst said Monday corn rationing may be necessary this year, following a U.S. Department of Agriculture report predicting farmers would plant far fewer acres of corn in 2008.
According to the March Prospective Plantings Report, farmers intend to plant about 86 million acres of corn this year, down 8 percent from 2007, when the amount of corn planted was the highest since World War II.
Analyst Heather L. Jones said in a note to investors if the USDA estimate proves accurate, the year may produce just 200 million bushels of corn. That, she said, wouldn't be enough to meet demand, given current export and feed demand trends and higher ethanol demand. Both ethanol and animal feed are made with corn.
"That is an untenable inventory demand, in our opinion," she said. "Consequently, we believe demand must be rationed or there needs to be a big supply response from other growing regions of the world."
The plantings report caused nervousness among meat producers and food makers who spent last year struggling to offset higher corn costs. Even though acreage was high, demand for ethanol and need overseas pushed prices to record levels.
Jones said she expects corn prices to rise even more, especially if unfavorable weather damages any of the crop.
The report delivered some promising news for meat producers, who also use soybeans to make feed. Farmers estimated they will plant 74.8 million acres of soybeans, up 18 percent from 2007.
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