January 10, 2009

 

 

US corn production is expected to slip slightly, while ending stocks should grow in the USDA's annual crop production, supply and demand and quarterly stocks reports on Monday (Jan 12), analysts said.

 

Surveyed analysts said the projected changes are due to the fact that a late harvest has left some corn still out in the field, as well as decreasing demand, which has been evident throughout the economic crisis and world recession.

 

Analysts project on average the 2008-09 corn crop will be pegged at 11.982 billion bushels, down from the USDA's November estimate of 12.020 billion. Yield is projected at 153.3 bushels per acre, down from the USDA's November estimate of 153.8 bushels.

 

Estimates ranged from 11.880 billion bushels to 12.078 billion.

 

The 2008 corn crop had an up-and-down year, with late planting and historic Midwest flooding giving way to ideal weather in the late summer and fall. But wet weather during harvest prevented some farmers from getting all of their crop into the bin, analysts said.

 

Farm Futures had one of the higher estimates in the survey, with total production of 12 billion bushels with a yield of 153.5 bushels per acre, but analyst Arlan Suderman said there's still potential for a bullish surprise in Monday's report, which will perhaps be tied with a surprise significant cut in crop size.

 

Sid Love, analyst for Kropf and Love consulting, had the lowest production estimates in the survey at 11.880 billion bushels.

 

"I think first of all we're going to lose 300,000 acres for harvest because we've got corn still in the field," Love said.

 

Analysts see a slight increase in ending stocks, to 1.489 billion bushels, up from the government's December estimate of 1.474 billion. The 13 analysts' estimates ranged from 1.292 billion bushels to 1.627 billion.

 

Don Roose, president of US Commodities, which projected the highest ending stocks in the survey at 1.627 billion, said the jump is largely attributed to a 100 million bushel cut in exports, as corn export sales are running at a six-year low.

 

Others are also expecting the USDA to reflect lower exports, as nearby futures prices above US$4 limit demand, partly due to worldwide bumper wheat harvests.

 

Many analysts are also expecting a cut in corn use for ethanol. Roose, who trimmed ethanol by 50 million bushels, said there are 16 ethanol plants that have recently closed.

 

But higher feed usage is seen by many analysts, including Roose and Terry Reilly, analyst for Citigroup. Reilly had the lowest estimate in the survey, at 1.292 billion bushels.

 

"I'm confident that they fed more corn than the USDA is expecting during the fall quarter," Reilly said. "We had a sharp decline in prices, I think a lot of feedlots took advantage of the price declines, and took the corn to build supplies that were gradually decreasing from the previous year."

 

Reilly projects that the USDA will keep ethanol unchanged. If anything, usage could increase, he said. Reilly and other analysts have noted that the USDA cut ethanol usage sharply in December, making further deep cuts unlikely.

 

Analysts expect changes on the world balance sheet, although there could be conflicting trends. Roose said he expects Brazil corn production down 3 million tonnes and Argentina corn production down 1.2 million tonnes due to the dry weather.

 

But analysts also noted that on Thursday China's think tank increased its projected corn production by 9.5 million tonnes, which likely means the USDA will increase its estimate for China as well.

 

Corn stocks as of December  1, 2008 are projected at 9.845 billion bushels, which would be lower than 10.278 billion at the same time in 2007. Analyst estimates ranged from 9.699 billion bushels to 9.998 billion.

 

Lower production could keep the quarterly stocks a little lower, analysts said. Love, who had the lowest estimate of the survey, at 9.699 billion bushels, said "my stocks are based on smaller crops."

 

Analysts are not expecting the quarterly stocks number would have much impact on the market.

 

"I'm not looking for any major surprises in the quarterly stocks report," said Reilly, whose estimate of 9.829 billion bushels was near the average. "I expect it would be reflective of decent feed demand."

 

He thinks ethanol production could be lower in the fall quarter, but overall it will increase throughout the year.

 

Suderman said that overall, for all of the reports, a bullish surprise is more likely than a bearish surprise.

 

"But I look for this to overall be the turning point -- we're starting to get the worst of the bearish news behind us," Suderman said. "I think we want to get past this report and see if there's any more bearish surprises and if not we'll start moving forward."