Corn

U.S. corn prices, basis nearby Chicago futures, in calendar 2002 reached a four year high reflecting prospects of a near halving of carryover stocks during the 2002/03 marketing year. The rally, however, proved short lived. The year started quietly with futures locked in a tight trading range pivoting around the $2.10/bu. level, plus or minus about 15 cents. The mid-year spike carried to $2.85. By yearend, futures were trading around $2.40, still 30 cents above a year earlier. On balance, the futures action in 2002 was a sharp contrast to 2001 during which prices basically traversed about a 40-cent range.

The 2002/03 U.S. corn crop was estimated at 9 billion bushels (228.7 million metric tons) vs. 9.5 billion in 2001/02. Harvested acreage in 2002 of 28.5 million hectare compares with 27.8 million in 2001. Average yield of about 8 tons per hectare, the lowest since 1997/98 compares with 8.7 tons in 2001/02, the latter equivalent to about 138 bushels per acre. Three states, Iowa, Illinois and Nebraska generally account for no less than a third of U.S. production. Generally, Iowa is the largest producing state with about 1.55 billion-bushel average during the past few years.

Domestic corn crops of almost 10 billion bushels are no longer unusual, nor are they necessarily burdensome if anticipated domestic and export demand reach expectations. Total domestic demand in 2002/03 of 7.9 billion bushels about equals 2001/02, but the usage mix changed in that feed use dropped to 5.7 billion bushels from 5.9 billion, respectively. Exports were put at 1.9 billion bushels for both years. Projected carryover stocks as of August 31, 2003 of 843 million bushels were the lowest since the late 1990's and compare with 1.6 billion a year earlier. The stock-to-total use ratio in 2002/03 was forecast at less about 16% and comparable to the previous season, but almost three times the very low 5% ratio of 1995/96: typically, the higher the ratio, the greater pressure on prices. In 2001/02 the average price received by farmers was forecast to range between $1.85-2.15 a bushel vs. the 2000/01 average of $1.85 and the 1995/96 record high of $3.24.

Corn is the leading U.S. feed grain with sorghums a distant second. The crop year encompasses September/August, but the international trade year is October/September. Animal feed usage in 2001/02 of 5.80 billion bushels compares with 5.89 billion in 2000/01. Food, seed, and industrial use (FSI) were estimated at a record high 2.03 billion bushel vs. 1.97 billion in 2000/01. The increases in FSI use during the past few years is not surprising considering that industrial demand for corn as a sweetener--High Fructose corn syrup (HFCS) continues to quicken, to another record high in 2001/02 of 543 million bushels from 537 million in 2000/01 and less than 500 million in the mid-1990's. Corn used to make fuel (ethanol) was estimated at a record high 680 million bushels in 2001/02 vs. 627 million in 2000/01.

The U.S. is the world's largest corn exporter, and Argentina a distant second. World importers are numerous, but the leaders are generally in Asia, paced by notably by Japan, then South Korea and Taiwan. U.S. exports in 2001/02 of a projected record large 2.1 billion bushels (52 million tons) compare with 1.9 billion in 2000/01. The 2001 estimate, however, could prove optimistic as actual shipments in the first few months of the year lagged outstanding sales. Moreover, exports to Japan in 2001/02 of 15.7 million tons, traditionally the largest purchaser of U.S. corn, have not yet recovered to normal levels in excess of 16 millions tons perhaps owing to lingering concerns about gene-altered U.S corn. U.S. corn imports are minimal, on average about 10 million bushels. World foreign trade in corn in 2001/02 of a near record large 74.1 million metric tons is marginally higher than initially forecast and compares with the record large 75.5 million in 2000/01, of which the U.S. accounted for about two-thirds in both years. However, in the mid-1990's the U.S. supplied about 80% of world exports. Argentina is forecast to export 10 million tons in 2001/02 vs. 12 million a year earlier, the decline reflecting a smaller crop owing to poor weather. South Korea's imports at 7 millions tons are a distant second to Japan, but also down from the 8.7 million tons imported in 2000/01. China imports relatively little corn, generally less than one-half a million tons, but is the third largest exporter in 2001/02 with an initial forecast 4 million tons, but could prove closer to 3 million tons vs. 7.3 million in 2000/01.

World corn production in 2001/02 of about 587 million metric tons, exceeded initial forecasts by 3 million tons, and compares with 586 million in 2000/01. China, since l987/88 the second largest producer, produced 108 million tons in 2001/02 vs. 106 million in 2000/01 and record large 133 million in 1998/99. China's corn output has increased sharply from the 1980's when annual production averaged less than 100 million tons. The U.S. and China are forecast to produce about 60% of the world's corn in 2001/02; Brazil and Mexico combined should produce about 9%. The gains seen in China's production during much of the past decade reflects increases in per capita income and meat consumption and the need for more corn as a livestock feed. Global use in 2001/02 of a record large 615 million tons compares with 604 million in 2000/01. China's use of 124 million tons compares with l20 million in 2000/01, the seventh consecutive year in which China's use has topped 100 million tons. The U.S. is the largest consumer with almost a third of the total--199 million tons in both 2000/01 and 2001/02. Brazil is in third place with about 36 million tons. Ending world corn stocks are forecast to decrease during 2001/02 to 125 million tons from 153 million a year earlier, with almost half the total in China and the U.S. with about one-third.

U.S. #2 yellow corn prices vary with the location. Typically, Gulf port prices are about 30¢ per bushel higher than prices in Central Illinois while quotes at St. Louis run about 10¢-12¢ higher than Illinois prices. In mid- summer 2001, #2 yellow corn in Central Illinois averaged around $1.92/bu vs. $1.50 a year earlier; for the Gulf ports the average was around $2.30/bu vs. $1.91, respectively.

Futures Markets

Corn futures are traded on the Bolsa de Mercadorias & Futuros (BM&F) in Brazil, the Budapest Commodity Exchange, the Marche a Terme International de France (MATIF), the Mercado a Termino de Buenos Aires in Argentina, The Kanmon Commodity Exchange (KCE) in Korea, the Tokyo Grain Exchange (TGE) and the Chicago Board of Trade (CBOT). Corn options are traded on the CBOT.

Excerpted from the CRB Commodity Yearbook. For more information on CRB products click here

Corn

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