February 10, 2011

 

US to slash soy stocks estimates

 

 

US soy stocks may be approaching its lowest in 35 years after US officials revised crop estimates on Wednesday (Feb 9), with forecasts for corn supplies also decreased, according to analysts.

 

Analysts on average expect the USDA to make only marginal cuts to estimates for domestic inventories at the close of the 2010-11 year.

 

However, analysts have estimated that the estimate for domestic soy inventories will be cut by 27 million bushels to 113 million bushels, representing the lowest inventories since 1976-77.

 

The broker added that such a figure, which comes amid resilient US exports of the oilseed, largely to China, may be reached through a number of revisions rather than in one hit on Wednesday (Feb 9).

 

For corn, Macquarie came in with the lowest estimate for end 2010-11 stocks among brokers polled, forecasting a figure of 663 million bushels, 82 million bushels below the current USDA forecast.

 

Macquarie analysts said they were more upbeat than peers over prospects for US corn exports, which in latest weekly data reached a marketing-year high of 1.2 million tonnes.

 

"We expect the corn production losses in Argentina will put more pressure on US export demand, while we also maintain a view that China will purchase corn from the US at some point this spring or early summer," Macquarie said.

 

Domestic demand for the grain looks firm too, the broker added, noting strong demand from ethanol plants and upbeat comments from meat giant Tyson last week.

 

"There is very little sign of any livestock producer pullback in production" despite high grain prices.

 

Ideas that the USDA will lift assumptions for corn use by ethanol plants were also voiced by other analysts.

 

Jerry Gidel, at North America Risk Management, said he expected USDA analysts "to tip their hats" to recent record rates of output by ethanol plants, which consume more than one-third of American corn.

 

However, he added that, with relatively minor changes expected to US crop estimates, investors would also be focused on foreign data, where bigger changes were possible.

 

For soy, better hopes for Brazilian output could see the USDA lift its estimate for global stocks at the end of 2010-11 by 1.2 million tonnes to 59.5 million tonnes.

 

"That's only a few days' consumption for China, so I'm not sure that would have shake up the market too much," he said.