The U.S. government issued a projection last week that world wheat stocks will decrease by 13 percent in 2013, and corn stocks are also projected to be lower than expected. The U.S. Department of Agriculture said “unrelenting” demand would pull U.S. corn and soybean stocks to their lowest levels in years—17 years for corn and eight for soybeans.
USDA’s projection was the second time in two weeks that it had lowered estimates of crop stocks. The move also came before agriculture ministers are due to meet this week as fears have been renewed of a food supply crisis after extreme drought in the United States and Australia has reduced yields significantly worldwide.
The USDA estimated that U.S. corn and soybean crops were slightly larger than traders had expected. However, corn and soybean crops are the smallest in recent years. Tight corn supplies have caused livestock feeders to press the government to relax the renewable fuel standard so that less corn will go to ethanol manufacturing. High corn prices have been devastating livestock owners.
Due to the smaller corn crop, corn imports are expected to 75 million bushels, which is three times larger than average. Exports will be at 1.15 billion bushels, which is the smallest in 37 years. Five years ago, that stood at 2.4 billion bushels.
Drought has also reduced Australia’s wheat crop to 23 million tonnes, which is a 12 percent decrease from a month ago, according to the USDA. Challenging weather in Russia has trimmed Russia’s wheat crop by 3 percent as well.
In soybeans, huge crops in Brazil and Argentina will buoy global inventories, which will offset the crash in U.S. supply.