U.S. corn stocks are 6.52 billion bushels, down 15 percent from a year ago and less than initially expected, according to a Texas AgriLife Extension Service economist.
“This is a big surprise and indicates we’re using up last year’s crop faster than we initially thought,” said Dr. Mark Welch, AgriLife Extension grain marketing economist. “We saw corn trading for more than $5 through the winter and expected to be backing off our use, but that hasn’t happened. Demand has been so strong that we overestimated what we had in stocks.”
The recent data released by the U.S. Department of Agriculture’s National Agricultural Statistics Service suggests the nation may not have enough corn acreage to meet demand.
“(Before the report) we thought 92 million acres planted was enough,” Welch said. “We may need 93 million or 94 million now. That’s what the market is evaluating today in that we need more acres.”
The largest increase in corn-planted acreage in 2011 is expected in South Dakota where growers intend to plant an additional 850,000 acres compared to 2010. Wet field conditions prevented many farmers from planting intended acres, according to USDA.
The largest decrease in planted corn is expected in Texas, down 150,000 acres due to an increase in cotton acreage.
“Producers are going take advantage of historically-high cotton prices,” said Dr. John Robinson, AgriLife Extension cotton economist. “Texas will plant more cotton acreage this year than any other state."
Texas is estimated to increase cotton acreage by 548,000 to 6.1 million acres. The U.S. is projected to plant 12.6 million acres of cotton, 15 percent above last year.
“Even though the forecasted 2011 U.S. cotton plantings are 15 percent higher than for 2010, market watchers were actually expecting an even higher number," Robinson said. "So USDA’s forecast of 12.6 million acres of U.S. all cotton was interpreted as bullish, sending Thursday’s (March 31) cotton futures market limit up.”
Acreage increases of more than 100,000 cotton acres are expected in North Carolina, Georgia and Mississippi. Meanwhile, corn demand has been strong in the livestock feedlot and ethanol production sectors, Welch said. Those sectors have been able to use options and other strategies to mitigate price risk, preserving margin potential, he said.
“For anybody to survive in an ethanol plant or feedlot, you locked in those prices last fall and got into futures and options strategies to limit your risk,” he said.
Developments in the Middle East could create a hurdle in the improving U.S. economy, Welch said. That could cause consumers to cut back on spending as a result of higher crude oil prices, slowing the demand for meat proteins such as beef and poultry.
As Japan continues to recover from the devastating tsunami event, Welch said he thinks they will need more imports of commodities in the future.
"Their demand for basic raw commodities may increase in response to the catastrophe,” he said. “As they are concerned about quality or restocking supplies in case of another aftershock, I think they may be more concerned about maintaining those levels.
"I think we will see positive export response in grain and meat products to Japan. Over the long term, the reputation of the American farmer providing reliable, quality commodities will keep them as one of our most important customers."