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U.S. Crop Boom Not Enough To Rebuild Supply

Huge U.S. corn and soybean plantings this spring will likely fail to refill razor-thin stocks enough to quell the surge in grain prices, the U.S. Agriculture Department said Feb. 24.

In updated forecasts for the world’s biggest crop exporter, the USDA warned that it could take several years to restore inventories to comfortable levels. It mostly maintained earlier forecasts on how many acres farmers would sow this spring, but said stocks at the end of the 2012 season would remain tight.

The U.S. government’s forecasts are likely to fuel more concern globally that high prices could persist far longer than they did in 2008 when they hit record highs, as supplies remain too thin to cope with any further weather disasters.

“While it is often said the cure for high prices is high prices, even with additional supplies expected this year, it is likely that the tight stocks-to-use situation will not be entirely mitigated over the course of one or even two growing seasons,” USDA chief economist Joseph Glauber told the department’s annual outlook conference.

The planting forecasts were unchanged from the department’s projections made earlier this month, when it projected 92 million acres of corn – the second largest since 1944 – and 78 million acres of soybeans, a record amount. Analysts had expected the agency to trim both forecasts marginally.

LITTLE CUSHION IN END STOCKS

The greater surprise was in projections for tight ending stockpiles for 2011-12. While both corn and soybean ending stocks will be higher than this year’s levels – with corn forecast to be the smallest since 1996 and soybeans amounting to a few week’s supply – they suggest very little cushion for unexpected shortfalls.

“It should be bullish all around even though the USDA stuck to their higher estimates than I probably would have done,” said Jack Scoville, analyst for Price Futures Group.

“It seems to me they’re implying some very strong demand here because the ending stocks estimates remain pretty tight, really across the board,” he added.

USDA said 2012 corn ending stocks would rise by 28 per cent to a still-thin 865 million bushels, and soybeans stocks by 14 per cent to 160 million bushels.

But USDA cut its outlook from a forecast made earlier this month for corn stocks by 23 per cent and soybeans by 16 per cent for 2012.

Contributing to the slim stocks will be soaring exports, which are expected to rise $9 billion this year to a record $135.5 billion.

“Today there are seven billion mouths to feed and many of them depend on American agriculture,” Debbie Stabenow, chairman of the Senate Agriculture Committee, told the USDA’s annual outlook conference.

China will become America’s top export market, surpassing Canada. China is seen importing 60 per cent of the world’s soybeans and 40 per cent of its cotton this year.

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“Itislikelythatthetightstocks-to-usesituationwillnotbeentirelymitigatedoverthecourseofoneoreventwogrowingseasons.”

– USDA CHIEF ECONOMIST JOSEPH GLAUBER

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