Corn outlook leads to
conflicting price forecasts for 2011/12
SDA reports have whipsawed
grain markets this summer and fall, as record-hot
weather in the Corn Belt kept analysts
guessing about yields and changes in
demand for animal feed grains upset
long-established patterns. This and
more has complicated the economic
outlook for poultry companies and
added uncertainty to the job of planning for 2012.
The immediate economic certainty
for poultry companies is that corn
supplies remain tight, even with larger
than expected beginning stocks for
the 2011/12 crop year. The October
12 World Agricultural Supply and
Demand Estimates raised beginning
corn stocks by 208 million bushels to
1.128 billion bushels. And while the
WASDE forecast for ending stocks
was raised by 194 million bushels to
866 million with reduced exports, that
level of ending stocks is equivalent to
only 25 days of use – below the 30
days considered by analysts to be a
safe level.
U
Aho forecasts Chicago corn prices
to average $6 a bushel in the 2011/12
crop year. “The prediction of a $7.10
Chicago average price by the USDA
is too high in my opinion,” Dr. Aho
told WATT PoultryUSA. “USDA is
predicting a drop of only 100 million
bushels of corn consumption for feed
for the crop year. That’s a very modest
drop in feed consumption.” He expects
the level of feed consumption to drop
more than the USDA forecast in its
October 12 report because of fewer
chickens and cows consuming feed
in 2012.
“The average corn price for the
2010/11 crop year of $5.75 was a record
high. It would be amazing to have
record high corn prices for two years
in a row. High corn prices are going to
bring out corn production everywhere
around the world, which is another
reason record high corn prices can’t
last,” he said.
Aho forecasts corn prices will
come down to an average $5 a bushel
in the 2012/13 crop year.
Corn price forecast for
2011/12 crop year
Tight supplies mean continued high
prices. In the October 12 report, USDA
forecast corn prices in Chicago at $7.10
a bushel on average for the 2011/12
crop year. Compare that to the 2010/11
average corn price of $5.75 a bushel.
From $5.75 to $7.10 is a big jump. Is
the USDA forecast too high?
Poultry industry consultant Paul
Demand picture is muddled
While a sluggish economy is causing U.S. poultry and meat producers
to reduce production, other demand
factors may work to keep corn prices
high. After the October 12 WASDE report, China purchased 900,000 metric
tons of U.S. corn – one of its largest
purchases ever. That purchase and others could cause USDA to raise its forecast for exports. USDA forecast only
1. 6 billion bushels
of U.S. corn exports
for 2011/12, which
was a drop of 50 million bushels from the
September report and
235 million from the
previous crop year.
Meantime, Mexico recently purchased
261,200 metric tons of U.S. corn, and
Russia announced plans to limit its
exports of grains.
Aho, however, focused more on
U.S. consumer demand for poultry
and meats in his outlook. “The thing
that I would caution people about is
that the question has not been settled
as to whether or not there will be a
double-dip recession. I would predict
that there will be no recession but
anemic growth,” he said.
He pointed to data on continued
weakness in U.S. median income.
“U.S. median income, adjusted for
in;ation, went down during the recession and is continuing down. That hits
chicken consumption and seems to explain weakness in consumer demand
for poultry better than GDP.
“If U.S. median income continues
down in 2012,” he said, “the poultry
industry will need to cut chicken production further."
Other corn supply and demand factors
to watch: In the near term, ethanol plants
are running full bore to allow blenders to
capture tax credits set to expire at the end
of 2011. In 2012, Brazil is putting more
acreage in corn production. ■
