March 4, 2011

 

US corn export sales to dampen after sudden rise

 

 

Corn export sales from the US were expected to slow although they topped one million tonnes for a fifth straight week, matching the longest streak since late 2007.

 

On Thursday (Mar 3), USDA showed that sales amounted 1.2 million tonnes last week, with Japan and Mexico making up about 80% of the total.

 

The latest flurry of corn sales, caused by fears of shrinking stockpiles and rising prices, has offset a sluggish first half of the marketing year and put sales back on pace to reach the USDA's most recent export target, but not exceed it, according to analysts

 

"What we have been seeing lately is some catch-up business from traditional buyers of US corn. They are extending coverage before we get too close to the planting season, realising that we have some pretty significant upside potential if we run into some problems," said Shawn McCambridge, an analyst. "But sustaining this type of pace is very doubtful."

 

In the unlikely scenario that corn export sales do exceed an average of one million tonnes a week through the remaining 27 weeks of the season, and if all sales are shipped on time, the US corn stockpile would be dwindled to an implausibly low 300 million bushels (7.62 million tonnes) before the next harvest.

 

Even the slacker pace indicated by the USDA's full-year export figures are projected to shrink ending corn stocks to a 15-year low of 675 million bushels (17.14 million tonnes) by the end of the marketing year on August 31.

 

Any further erosion in that number is more likely to derive from stronger ethanol consumption, particularly as oil prices spike, than higher export demand, analysts said.

 

Since February 17, exporters have sold nearly 32.9 million tonnes of US corn for shipment in the 2010/11 marketing year, about two thirds of the way to the USDA's 49.53-million-tonne full year export target.

 

Sales have averaged 1.2 million tonnes/week since mid-January as big buyers increased forward-purchases after a more hand-to-mouth buying strategy earlier in the season, when sales averaged less than 650,000 tonnes a week. 

 

However, analysts said the stronger forward-buying suggested an inevitable slowdown in demand later in the spring and summer.

 

"What they buy now they do not need to buy later. If they are accelerating now, they will not need to buy on the back end of the corn marketing year," said a trader.

 

The top five buyers of US corn, Japan, Mexico, South Korea, Taiwan and Egypt, make up 75% of imports annually and four of the five were ahead of their normal pace of buying at this point of the marketing year.