January 13, 2011

 

US cuts soy, corn supplies below expectations

 

 

The US will be left with lesser soy and corn stocks than expected at the end of this marketing year, the government said in a report likely to boost grain markets and spark added fear over surging world prices.

 

The diminishing stocks in the world's biggest food exporter and poor outlooks from other major exporting countries is combining to make the year the toughest since 2008 when tight supplies led to rising prices and food riots in some countries.

 

USDA forecast soy ending stocks at 140 million bushels, 10% below analyst expectations, and corn ending stocks at 745 million bushels, down 4% from trade forecasts and the lowest level since 1995.

 

"These numbers are bullish numbers across the board," said Rich Nelson, an analyst with the brokerage Allendale Inc. "Most of the moves were made on production revisions and that should be a surprise to most of the trade."

 

USDA said the corn stocks-to-use ratio was projected at 5.5%, the lowest since 1995/96 when it dropped to 5%, as it trimmed yields for last fall's harvest and boosted estimates for ethanol use.

 

Stocks of US soy totalled only 2.28 billion bushels as of December 1, or 3% less than traders had expected, while production was forecast at 1.3% less than expected by the market at 3.329 billion bushels.

 

Don Roose, an analyst at US Commodities in Iowa, said the lower-than-expected numbers mean markets will want to move higher.

 

USDA said December 1 corn stocks also came in slightly lower than expected at 10.04 billion bushels, down 8% from a year ago and just below the 10.067 billion bushels on average expected by traders.

 

Wheat inventories at December 1 came in closer to expectations at 1.93 billion bushels, up 8% from a year ago.

 

The USDA boosted wheat exports because of brisk sales to date and reduced competition from flood-hit Australia.

 

The USDA released its first estimate of winter wheat plantings. At 40.99 million acres, it represented a 10% increase over last year and reflected trade expectations of big plantings because of strong prices and good planting conditions.

 

Strong world demand, led by China, and bad weather in big producing countries such as Australia have combined to diminish crop inventories in the US and around the world.

 

The USDA has not yet forecast how much corn and soy US producers will plant in coming months. But this year is off to a bad start with searing heat in Argentina and floods in Australia darkening the outlook for their big harvests.

 

USDA cut its forecast of Argentina's soy production by 3% from last month, and also cut Argentina corn outlook by 6%.

 

Australia's wheat crop was trimmed by 2% from last month, and exports were forecast to be cut by 1.5 million tonnes as heavy rain and flooding reduced the quality of the harvest and further pressured world supplies and prices.

 

However, the USDA increased global 2010/11 wheat ending stocks slightly. Traders had expected a cut.