Soaring demand from the ethanol industry is sapping US corn supplies, keeping prices near 10-year highs and making it tough for analysts to estimate how much of the feed grain will be on hand at the end of the year.
And forecasts for the corn stockpile next year are an even bigger wild card as the ethanol train barrels ahead and US farmers gear up to plant as much corn as they can amid signs that crop weather in the US heartland this summer may not be conducive to bumper yields.
"So much is predicated on weather. Even if we get 8, 10 or 12 million more acres or whatever, production still will be determined by weather," said Daniel Bluntzer, director of research for Chicago-based trade house Frontier Risk Management.
There are signs that a global El Nino weather phenomena may be ending quickly, which would cause a rapid shift to a La Nina pattern and spark a hot, dry summer in key US corn states like Iowa and Illinois.
The US Department of Agriculture (USDA) early Friday will release its February supply/demand report. Analysts polled by Reuters on average pegged US corn stocks at the end of the current (2006/07) marketing year at 766 million bushels or more than 60 percent below the corn supply at the end of last year.
The ethanol industry is expected to use over 2.0 billion bushels of corn this year, roughly 20 percent of the US crop and about equal to the amount exported by the United States each year.
Analysts' estimates for this year's end-of-year stockpile was only 14 million bushels more than the USDA projected in its January supply/demand report, but estimates ranged widely, from 702 million to 852 million bushels.
Some analysts think the current 10-year high in corn prices is cutting into exports and trimming livestock feeding rates, but others don't yet see a slowdown in demand.
"I think they will raise the exports on corn, so I'd look for a carry-over down around 702 (million bushels)," said Sid Love, analyst for Kropf-Love Consulting, Kansas City.
Dan Cekander, analyst for FIMAT USA, pegged corn ending stocks at 802 million bushels, near the high end of analysts' estimates. Cekander said USDA could cut either its forecast for corn exports or corn feeding.
"The wheat/corn price relationship has changed since their last supply/demand report. Wheat has worked into feeding rations so I thought they could lower the corn feeding," Cekander said.
Though Friday's report will be carefully scrutinised, analysts will continue to refine their long-term supply/demand scenarios for corn as one of the most important spring planting seasons in US history approaches.
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