Corn supplies following this autumn’s U.S. harvest likely will remain tight, keeping prices for the grain historically high, even with farmers expected to boost acreage this year, Tyson Foods Inc. executives said.
Cropland planted to corn this spring is expected to reach 92.2 million acres, up 4.5 percent from last year and the second-highest total since the end of World War II, according to a U.S. Department of Agriculture forecast released March 31.
But even if corn production jumps accordingly, “we will still have a very tight supply and demand scenario in 2011,” Donnie Smith, Tyson’s chief executive officer said during a May 9 conference call with reporters.
The corn market’s price lows for the upcoming harvest season “will be significantly higher than the new-crop lows in the previous year,” Smith said. The call followed the release of Tyson’s results for the company’s fiscal 2011 second quarter.
The Tyson CEO’s comments suggest overall corn demand will remain strong even with U.S. stockpiles on track to drop to 15-year lows. That partly reflects high use by livestock feeders keeping pace with stronger meat export markets. Additionally, ethanol distillers are using record amounts of corn as high oil prices boost fuel-makers’ margins.
As the largest U.S. poultry processor, Springdale, Ark.-based Tyson is also one of the biggest domestic corn buyers. In its quarterly earnings statement released May 9, Tyson said it expected to spend $500 million more on grain in 2011 compared with 2010.
That would be a nearly 13-percent increase over the approximately $4 billion the company spent on grain last year, according to an estimate by analyst Stephen Share, who’s with Morgan Joseph TriArtisan LLC in New York.
The corn market’s record rally this year fueled speculation that some livestock producers may be forced to find other feed options, such as lower-quality wheat, to avoid losses.
In the May 9 call, Tyson said it has secured its corn and soybean meal needs for the remainder of its fiscal 2011, which concludes at the beginning of October. The company has a “limited” amount of feed locked in for fiscal 2012, saying it’s too early in the U.S. growing season to have any idea how large the corn and soybean crops may be.
“We really don’t like to cross crop years” when buying feed, Smith said during the call. “There’s a lot of unknowns. It’s pretty dangerous to start buying the crop for the fall before you’ve planted the crop.”
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