U.S. corn surplus hits 16-year low

Surplus corn stocks have hit their lowest point since 1995 amid increased demand from ethanol and other sources, the U.S. Department of Agriculture said yesterday. "That surplus amounts to an 18-day supply of corn ready for immediate use, compared with more than 40 days a year ago," Dan Piller of the Des Moines Register reports. The increased demand has led corn prices to double from their $3.50 price last June, and food makers and restaurants have already begun warning consumers they will see the effect of the soaring prices as a result. (Register graphic)

"For Iowa's economy, the surge in prices for corn and soybeans has added an extra $7 billion in cash above the $13 billion farmers received for their corn and soybeans a year ago," Piller writes. The use of corn for ethanol has risen 33 percent since 2008 and will consume almost 40 percent of the corn produced last year. The Renewable Fuels Association jumped ahead of likely food versus fuel arguments with a statement, saying, "Many will use strong ethanol demand as the rationale to drive the price of corn futures as high as the market will bear. In turn, this will likely cause ill-informed industries and talking heads to pronounce U.S. ethanol production as the root cause of food inflation the world over."

USDA's report also outlined a number of factors facilitating the decline in surplus corn stocks other than ethanol, including a drop in the corn harvest from 13.1 billion bushels in 2009 to 12.4 billion bushels last season. USDA also reported use of corn for seed and food had risen from 5.9 billion bushels last may to 6.2 billion bushels this month and the amount of corn used for feed, despite an overall reduction in U.S. livestock herds, had increased by 60 billion bushels. The U.S. also increased corn exports by 434 million bushels, stimulated largely by crop shortfalls in Russia and Ukraine and expected smaller crops in Argentina, Piller writes. (Read more)