Higher Supply Forecast For Corn Stocks

fromKPR

The USDA's first crops supply report of the new year surprised some analysts. That's because it didn't lower the estimate for corn in storage. Predictably. that led the commodity to drop about 50 cents a bushel.

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STEVE INSKEEP, HOST:

Let's report next on the food supply in this country. With so many Americans out of work, people feel the change in prices at the grocery store. So it's at least a potential relief to learn what the U.S. Department of Agriculture reported about the nation's crop supply the other day. The supply of corn, used in many kinds of food and fuel, is not as tight as expected, so the price of corn quickly fell 50 cents a bushel. But Harvest Public Media's Eric Durban reports it may take time to see a difference.

ERIC DURBAN, BYLINE: Spend some time driving around Southwest Kansas and you're bound to run into both fields of corn and livestock feed yards. On the surface, those are two different industries, but as far as consumers and concerned, they go hand in hand. Corn can make up anywhere from a third to two-thirds of total feed cost for cattle producers. Kansas State University ag economist Glynn Tonsor says a big drop in corn prices eventually makes it way to the grocery aisle.

GLYNN TONSOR: Even a 50-cent change in corn price will result in a change in meat price simply because most meat industries are what we consider rather competitive.

DURBAN: After the USDA reports came out last week, Steve Freed with the investor services branch of Archer Daniels Midland offered his analysis in a teleconference with investors.

STEVE FREED: In general as we look ahead in 2012 the corn situation is still snug. And we're going to have to rely on good plantings and good weather or prices will snap right back, not only to where we are today but maybe even higher.

DURBAN: With corn supplies still tight, it's likely that lots and lots of corn will be planted in the spring. Farm Futures magazine released its most recent planting attention survey a week before the USDA report. It projected a whopping 93.6 million acres of corn - the largest in more than half a century. High prices last year helped ethanol barely eclipse livestock feed for the first time as the top consumer of corn. More than 40 percent of the crop went to fuel. After reaching an all-time high of almost $8 a bushel, corn prices have retreated since the summer to around $6. Tonsor says the dip in prices makes corn a more viable option for feed.

TONSOR: In many ways the corn price change or the expectations of change that came out with the USDA report influences beef prices, pork prices, poultry prices, you know, for a few months than now more than it does what you see on the retail shelf today.

DURBAN: He says that even then it's difficult to predict if and when consumers will see lower food prices tied to corn. For NPR News, I'm Eric Durban in Garden City, Kansas.

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