Agricultural economists with a leading international provider of banking and financial services believe that the U.S. Department of Agriculture may have been too optimistic in its forecasts about the speed at which the American demand for feeds is likely to recover. While a recovery in the U.S. feed demand is within sight, they suggest, quantities will come back slowly.

Kona Haque, agricultural commodities director of research at Macquarie Capital Ltd. explained this difference of opinion in terms of the projected changes in the corn balance for the U.S. The USDA has indicated that the quantity of corn needed for feeds could leap from 4.4 billion bushels in the 12 months to August 2013 up to 5.33 billion bushels in 2013 and 2014. While the Macquarie team estimates a similar 4.41 billion bushels for 2012 and 2013, however, it suggests this will grow only to 4.9 billion bushels over the next crop year.

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This is part of the reasoning behind a belief that 2013 and 2014 will bring a global surplus of corn that sees its price per bushel slide down to $4.50 from the $6.50 mark experienced recently, according to remarks by Haque to the 2013 IGC Grains Conference held in London, England. The prediction of a surplus is based on U.S. corn production bouncing back to 346 million metric tons in 2013 and 2014 after drought forced the downturn to 274 million metric tons last year, while output also rises in other countries such as Argentina and Ukraine.

But the 71 million metric tons of maize produced in Brazil in 2012 and 2013 could drop to only 55 million metric tons over the next campaign, Haque suggested. Brazilian growers face a financial disincentive in the gap between their production cost of at least $75 per ton and the $30 calculated for established Midwest farms in the U.S. It may be a few years yet before global prices rise once more and encourage Brazil's farmers to expand their corn production.