Wednesday, April 2, 2008


NEW YORK — A BB&T Capital Markets analyst said Monday corn rationing may be necessary this year, following a U.S. Department of Agriculture report predicting farmers would plant far fewer acres of corn in 2008.

According to the March Prospective Plantings Report, farmers intend to plant about 86 million acres of corn this year, down 8 percent from 2007, when the amount of corn planted was the highest since World War II.

Analyst Heather L. Jones said in a note to investors if the USDA estimate proves accurate, the year may produce just 200 million bushels of corn. That, she said, wouldn't be enough to meet demand, given current export and feed demand trends and higher ethanol demand. Both ethanol and animal feed are made with corn.

"That is an untenable inventory demand, in our opinion," she said. "Consequently, we believe demand must be rationed or there needs to be a big supply response from other growing regions of the world."

The plantings report caused nervousness among meat producers and food makers who spent last year struggling to offset higher corn costs. Even though acreage was high, demand for ethanol and need overseas pushed prices to record levels.

Jones said she expects corn prices to rise even more, especially if unfavorable weather damages any of the crop.

The report delivered some promising news for meat producers, who also use soybeans to make feed. Farmers estimated they will plant 74.8 million acres of soybeans, up 18 percent from 2007.
But that might not bring much relief, Jones said, since corn is still the primary feed ingredient.
Shares of Tyson Foods Inc., one of the world's largest meat companies, fell 12 cents to $16.01 in afternoon trading, while shares of pork producer Smithfield Foods Inc. dropped 39 cents to $25.57.

Chicken producer Pilgrim's Pride Corp. shares dipped 19 cents to $20.28. Earlier in the day, the stock reached a new four-year low of $20.08.

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