January 13, 2012
US grains estimates may increase corn supply fears
US government's grain forecasts are set to sharpen concerns over diminishing corn stocks from Iowa to Argentina, as drought shrinks southern crops while lower prices help bring US demand.
While the USDA is likely to revise down forecasts for domestic corn stockpiles at the end of this summer to their lowest in 16 years, the data should also show a continued healthy cushion of wheat supplies as US farmers sow their biggest winter crop in three years.
In one of the year's most important crop reports, one with a track record of roiling prices, grain traders will be looking for a host of things: higher corn consumption by livestock after some feed use was diverted to wheat earlier this year; a dimmer outlook for Latin American corn and soy crops as La Nina parches; higher forecast soy stocks due to poor exports.
In sum, the report will likely turn up the heat on global corn markets, possibly stoking prices that have tumbled nearly 20% from last year's record, while giving little ground on other grains whose stocks remain low by global standards.
Bad luck on the weather could tip many more into starvation, and governments internationally are mindful that high prices can lead to food riots such as those that marked much of 2008.
"...With global grain production actually falling short of consumption in seven of the past 12 years, stocks remain worryingly low, leaving the world vulnerable to food price shocks," said Janet Larsen of the Earth Policy Institute.
The January report includes three sets of important data: the final figures for the 2011 autumn grain harvests, with slightly lower corn supplies; quarterly stockpiles as of December 1, with corn and soy both lower than a year ago; and the first estimate of the winter wheat acreage, the highest since 2009.
Last year after the January report, corn and soy prices soared to their daily limits in Chicago after the government projected ultra-thin stocks, prompting concern globally of another run-up in already lofty prices.
After falling to their lowest in a year in December, prices are once again on the rise due to worries over Latin American supplies.
After being wrong-footed by USDA reports a host of times in the past few years, analysts' were unusually divided over certain parts of the data, including corn stocks.
Traders cut their average forecast for corn stocks after this year's harvest by nearly 100 million bushels to a 16-year low of 749 million bushels, according to a Reuters poll. But the range ran from nearly 600 million to more than 1 billion.
There was also a wide gap over how deeply the USDA would cut its estimates for South America, especially Argentina, which was on tap to provide a fifth of the world's corn supply. Analysts forecast a cut in corn output of anywhere from 7 to 24% versus the USDA's December estimate of 29 million tonnes.
Corn, widely traded on global markets, is a key barometer of the health of the world's food supply as it provides food for millions of people, feed for livestock and fuel for vehicles.
Analysts pegged last year's US corn crop at a hefty 12.27 billion bushels, though that would be down from 12.31 billion bushels USDA forecast in December.
