Thread: Analyst Predicts Corn Rationing in 2008

March 31, 2008, 2:18PM
Analyst Predicts Corn Rationing in 2008

© 2008 The Associated Press

NEW YORK — 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.

But that might not bring much relief, Jones said, since corn is still the primary feed ingredient.

Shares of Tyson Foods Inc., one of the world's largest meat companies, fell 12 cents to $16.01 in afternoon trading, while shares of pork producer Smithfield Foods Inc. dropped 39 cents to $25.57.

Chicken producer Pilgrim's Pride Corp. shares dipped 19 cents to $20.28. Earlier in the day, the stock reached a new four-year low of $20.08.

http://www.chron.com/disp/story.mpl/ap/fn/5662307.html

Newest comments first

gazoogle wrote:
Each acre of corn produces about 90 bushels of corn. 86 million multiplied by 90 is 7 billion 740 million. Almost 8 billion. How on earth does this analyst arrive at 200 million bushels of corn? This is a massive discrepancy and needs an explanation.
3/31/2008 3:45 PM CDT
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htxns wrote:
This doesn't include candy corn, does it?
3/31/2008 3:51 PM CDT
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Websurfer wrote:
This article appears to have been cut and pasted from the AP with some serious errors that could easily sway investors if they did not do a little reasearch. In particular this paragraph "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.". A quick "google" will show that in 2007 the average per acre yield for corn was over 150 bushels per acre so either this was a cut and paste error or Ms. Jones is trying to drum up some business with investors; you decide.

3/31/2008 3:53 PM CDT
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ricknhouston wrote:
Stop using our food supply to manufacture ethanol fuel that is only making those vested in the "corn futures market" multi-billionaires. (certain select congressmen come to mind) We have many, many other sources to make ethanol from that will cost less to produce, do less damage to the environment, & cost less at the pump ... oh yeah, & the American people would only have to pay for it once!
3/31/2008 3:54 PM CDT
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genuinefraud wrote:
Does this mean that the price of my popcorn at the movies will go up to 12 dollars a bucket?
3/31/2008 3:56 PM CDT
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ricknhouston wrote:
Neo-Cons ... I'm so sick of em I could puke!
3/31/2008 3:56 PM CDT
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Websurfer wrote:
I agree gazoogle.

From the Ag Report.

"WASHINGTON, D.C. -- The USDA National Agricultural Statistics Service has issued the crop production summary for 2007:

Corn for grain production in 2007 is estimated at 13.1 billion bushels, down 1 percent from the November forecast but 24 percent above 2006. The average U.S. grain yield is estimated at 151.1 bushels per acre, down 1.9 bushels from the November forecast but 2.0 bushels above 2006. The 2007 yield estimate is the second highest on record, behind 2004, while production is the largest on record as producers harvested the most corn acres for grain since 1933."

3/31/2008 3:56 PM CDT
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corn wrote:
I don't know how this article could be so wrong unless there was a typo somewhere. In 2007, we harvested 86.5 million acres, about 93 percent of the planted acreage, with a yield of 151 bushels per acre, for a total production of 13.1 billion (that's billion with a B) bushels. This year, they estimated that we will plant 87 million acres. If we harvest 93 percent of that acreage with the same yield as last year, we will have production of about 12.3 billion bushels, which is still a huge crop. We do have increased demand, but the farmer is doing all he can to meet the demand. Thanks to biotechnology and improved farming practices, our production per acre continues to increase. Also, the grain stocks report was released today. We have a total of 6.86 billion bushels in storage right now--up 13 percent from last year at this time.
3/31/2008 4:10 PM CDT
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indigoinc wrote:
Corn Rationing. Give me a break. Isn't that why we have a futures market? To "Ration" based on price?? Think a little about it people, the government hasn't told people that they can't buy the food that they want since WWII and THAT was only because the Government didn't want to compete with consumers, causing a price run-up. If corn gets too expensive, people will switch to less expensive things to eat. (Yes, I know, corn if feed for all things meat, so what?) I am not saying ethanol isn't stupid, ('cuz it is) all I am saying is there will never be rationing of a commodity, that's why we have a market.

While we are at it, 2 things to consider.

1. if ethanol is sooo important, why not buy sugar on the international market to make ethanol with? It is WAY more efficient. Answer: Because ethanol is about greasing the palms of the farmers in exchange for votes for republicans.

2. When the nation comes to it's senses and kills the ethanol subsidies. What do you think is going to happen to all those farmers that took out mortgages and loans to buy land and equipment???

There is an implosion coming...

3/31/2008 4:14 PM CDT
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