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Published July 18, 2011, 08:34 AM

Global grain usage expected higher

A week of surprise and volatility would best describe the grain markets this past week. As expected, USDA kept the acres both planted and harvested in sync with the June 30 acreage report.

A week of surprise and volatility would best describe the grain markets this past week. As expected, USDA kept the acres both planted and harvested in sync with the June 30 acreage report.

Naturally, no one believes the acreage numbers from June 30. USDA has said it will survey Montana, North Dakota, Minnesota and South Dakota. The results from this new survey will affect the supply and demand report in August.

Joe Prusaki, head of the National Agricultural Statistics Service, says NASS called all its associates in Ohio and asked them if they thought the state needed to be surveyed again. The answer was an adamant no. Granted, Ohio may have gotten many acres planted, but under what conditions?

The report clearly showed NASS did not agree with World Agricultural Supply and Demand Estimates numbers in the stocks report. NASS numbers indicated nearly 200 million fewer bushels of corn in commercial/farmer storage. And while the carry-out still increased from the June 9 supply and demand report, it did so by a smaller percentage than what the trade had braced itself for in the new crop.

Supply and demand numbers in July are tentative, especially this year, given the uncertainty on acreage planted and harvested. I would look for the USDA to lower planted and harvested acres in the August report. Add to this the lateness of the planted crops, persistent heat on the Southern Plains, confusion and questions about the remaining stocks and prospects for an increase in Chinese corn purchases. And add that to two weeks of above-normal Midwest temperatures during the peak pollination period in the last half of July and I would suspect the room for yield adversity goes to zero. Further, consider that the world carry for coarse grains including corn, sorghum, barley, oats and rye is extremely tight. World coarse grain ending stocks for 2011 to ’12 is pegged at 149.23 million metric tons compared with 157.3 million metric tons the year before and down sharply from the 2009 and ’10 number — 195.1 million metric tons.

Global coarse grain usage in 2011 and ’12 is expected to hit 1.158 billion metric tons, which is up nearly 30 million metric tons from 2010 and ’11 and 50 million metric tons from two years ago. China’s coarse grain shortfall in 2011 and ’12 is forecast at 6.38 million metric tons. USDA’s report increased usage numbers for ethanol in the coming year by 100 million bushels. USDA may be onto something.

China looks to be in the U.S. market for paylean pork carcasses starting Aug. 1. There are only one or two packers that can supply paylean pork, and the last time China bought paylean pork was from Smithfield in 2007.

It is said China will take 1,000 carcasses daily for three months in hopes of softening the rapidly rising cost of pork in China. In China, pork prices are up 57 percent for the year so far. Promar reports that low hog inventories and higher labor and feed costs have been driving this trend. The Chinese government will pay pig farmers 100 yuan — $15.50 — for every sow producers breed to increase pork production domestically and help cool inflation.

The government plans to spend 2.5 billion yuan in pig farms and increase subsidies for veterinarians who fight epidemics from 1,000 yuan to 1,200 yuan. All this means more corn and dried distillers’ grains may be needed in China. The Chinese think tank CNGOIC anticipates a 2.4 percent increase in Chinese corn production this year. That increase perhaps is tied to anticipated increase in yields.