US corn inventories will rebound from one of their lowest levels on record to one of the highest in 2013-14, as the harvest hits a record, but "strong foreign competition" limits exports.

The US Department of Agriculture - in its first detailed forecasts for the domestic corn balance sheet in the forthcoming season - revealed it had factored a yield of 163.6 bushels per acre into its estimate revealed on Thursday of a record 14.35bn-bushel crop this year.

"Fall and winter dryness have little correlation with conditions during the following growing season and eventual yield outcomes," the USDA said, referring to, in some areas, the persistence of the 2012 drought which sent the yield to a 16-year low of 123.4 bushels per acre.

But use of the grain will not grow as strongly, enabling a recovery to 2.177bn bushels (55.3m tonnes) in stocks at the close of 2013-14, in August next year – more than three times the level at which they are expected to end this season.

Inventories at that level would represent the highest in 26 years – since the end of a late-1980s build in inventories which drove Chicago corn prices below \$1.50 a bushel, a low not reached since.

USDA chief economist Joseph Glauber on Thursday forecast a sharp drop in prices in 2013-14, of one-third to \$4.80 a bushel.

Demand dynamics

Consumption of corn by livestock and poultry farms will show a healthy rebound, of 21% to a six-year high of 5.4bn bushels, with "lower feed costs expected to provide an economic incentive for increased feed use", the USDA said.

However, the recovery in corn use in making ethanol will be limited by falling gasoline use, a reflection of greater vehicle efficiency, lower mileage and weak economist recovery.

The rebound in use in other processing purposes will also be constrained, with the market for corn-based sweeteners coming under pressure from lower exports to Mexico, "as sugar output there increases".

'Formidable competitor'

And US exports will, at 1.50bn bushels (38.1m tonnes), remain at historically low levels, as competition from growing rival forces in corn, such as Brazil and Ukraine, "tempers the rebound".

"Substantial foreign competition keeps exports at their second lowest level since 1993-94 as the US share of world corn trade struggles to recover," the USDA said.

"Brazil has emerged as a formidable competitor" in export markets, if one tainted somewhat by logistical hiccups.

"Both Argentina and Ukraine are expected to produce and export substantial volumes once again, remaining strong competitors."

Growing forces

The comments follow Brazil's emergence as the top corn exporter, one some accounting methods, although this is also a reflection of the depth of the decline in US output last year.

Brazil's production has swollen through increased sowings of so-called safrinha corn, planted as a follow-on crop to soybeans.

Ukraine has also emerged as a force in corn, helped by improved seed, and a quest by farmers to avoid the risks associated with autumn-sown crops in a country with cold winters.

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