National corn inventory levels nearing record lows and flooding in corn production areas have delivered a double shock to pork producers this spring. If additional threats occur that further diminish harvested acres, corn prices may continue to spike higher.

“The June WASDE report resulted in a stocks-to-use ratio of 5.2 percent for the 2011/2012 marketing year, even tighter than the 5.4 percent for the 2010/2011 marketing year,” says Darrell Mark, University of Nebraska Extension livestock marketing specialist.

If realized, the 695 million bushel ending stocks would be the lowest ending stocks since 1995/1996. “This year, the June WASDE projections for 2011/2012 were based on 90.7 million acres, which is 1.5 million acres less than the March prospective plantings,” says Mark. “Harvested acreage forecasts are now down to 83.2 million acres which is 1.9 million acres less than in the May forecast.”

Mark admits he won’t be surprised to see a further reduction in harvested acres forecast in the coming months, adding more upward pressure to prices. “All this is supportive to corn prices for the next year and a half or longer,” he says.

Much will depend on the actual acreage loss due to flooding. “I hear estimates that range from 200,000 up to 1 million acres of ground that will be lost just due to the Missouri River flooding alone,” says Mark. “If 1 million acres were actually lost, the corn market has a lot of upside yet to go.”

Mark predicts that the current tight stocks-to-use ratios will keep prices near the levels seen over the past marketing year. Additional yield threats could further spike prices. “If demand remains constant and yields are further threatened, it would be likely that prices will create new record highs.”

Given the production responses experienced from nearly all corn-growing areas, Mark is somewhat surprised that the crop rating is so high. “It is a bit hard to believe that 70% of the national crop is rated good to excellent. I think for the field reporters that assist with this weekly survey, it is a hard thing to estimate this year,” he says. “In my area, the corn looks terrific at least on the hills and on well-drained soils. The low spots drowned out a long time ago, or were never planted in the first place.”

Whatever the acreage turns out to be, we will not run out of corn, Mark predicts. “Market prices will increase to the point that a small supply will remain at the end of the marketing year. However, that could mean dramatically higher prices which would be devastating for livestock producers and push their returns deep into the red.”