January 7, 2011

Grain importers may hold buying on high US prices 

Reasons for soft US crop exports revealed on Thursday (Jan 6) may be more than holiday weakness, with high prices likely to attract importers to wait for South American supplies to come on board.

US weekly export sales unveiled on Thursday fell behind analysts' forecasts for crops, with only wheat, at 464,700 tonnes, narrowly beating market estimates.

"Export sales this morning were disappointing with corn and soy sales not even close to trade estimates," US broker Benson Quinn Commodities said.

Corn sales of 369,100 tonnes fell short of trade estimates of 500,000-700,000 tonnes, while soy sales were, at 552,700 tonnes across the current and next marketing year, short of expectations of a figure of at least 700,000 tonnes.

The data were "poor across the board", US Commodities said.

However, while some observers attributed the weakness to the influence of the end-of-year holiday season, Tim Hannagan at rival broker PFGBest questioned buyers' appetite to snap up US crops at high prices when South America was close to corn and soy harvests .

"Prices are very high in the US, and at a time when we are getting ready for South American crops to come on line," he said. "South American farmers have to sell. They don't have the option to store it like we do - they haven't got the storage," he added.
 

"That makes hanging on for now an interesting proposition for importers," he said, while adding that demand would return in spring from importers, such as China, which had "used the US as a grocery store".

However, the ability for many buyers to wait may be limited by their need for immediate supplies; a factor Macquarie analysts have said may revive US corn exports early in 2011.

Furthermore, hopes for Argentina's corn and soy harvests have suffered a series of downgrades, thanks to a dearth of rainfall.

Informa Economics on Thursday cut to 23.8 million tonnes, from 24.4 million tonnes, its forecast for the country's 2010-11 corn crops.

The Buenos Aires Grain Exchange, in its first estimate for the season, pegged production at 20.4 million tonnes, down from 23.2 million tonnes in 2009-10.

However, hopes for Brazilian corn and soy have remained intact, thanks to regular rain after a dry start to the season, which delayed sowings.

Informa kept its estimate for the corn crop in the second-ranked exporter of the grain unchanged at 53.2 million tonnes, with the soy production forecast left at 69.3 million tonnes.
 

Separately, Brazil's official crop bureau, Conab, kept its soy production forecast at 68.6 million tonnes, with potential for an upgrade if rains continue to prove abundant.

"If the expected area is confirmed and favourable weather conditions seen so far continue, the crop could top the estimated total volume," Conab said.