Corn supplies in the U.S. are declining at the fastest pace since 1996 as a Midwest heat wave damages the world’s largest harvest for a third consecutive year.
Bloomberg News reports that stockpiles were probably 3.168 billion bushels (80.47 million metric tons) on June 1, 47% less than on March 1, the average of 22 analyst estimates show. The worst Midwest drought in more than a decade is wilting a harvest that the USDA says will be the biggest ever. The agency updates its inventory estimate June 29 and its production forecast two weeks later.
Futures surged 25% since reaching a 20-month low June 15, and Morgan Stanley expects prices to advance another 10% to $7 a bushel in two months if the drought persists. The rally is boosting global food costs that the United Nations estimates dropped 14% from a record in February 2011 and widening losses for ethanol producers including Decatur, IL-based Archer Daniels Midland Co.
Meanwhile, corn rallied 14% this month to $6.3375 a bushel on the Chicago Board of Trade on Wedneday, trailing only wheat and natural gas among 24 commodities in the Standard & Poor’s GSCI Spot Index, which fell 3.7%. The MSCI All-Country World Index of equities rose 1.3%, and the dollar fell 0.8% against a basket of six currencies. Treasuries lost 0.2%, a Bank of America Corp. index shows.
The USDA forecast June 12 that pre-harvest stockpiles at the end of August would plunge to a 16-year low of 21.62 million tons. That’s a 50% decline in two years, the most since 1990.