March 12, 2012
After a benchmark report cut estimates for world inventories of all three major crops, corn, soy and wheat, citing poor weather and robust consumption, grain prices rebounded in Chicago.
The USDA, in its much-watched monthly Wasde crop report, ditched a forecast that the world was set for record wheat stocks at the close of 2011-12, cutting its estimate 3.5 million tonnes to 209.6 million tonnes, taking it back below the high set 12 years ago.
The downgrade reflected an upgrade to forecasts for "food, seed, and industrial use in China and higher wheat feeding in Australia, Iran and South Korea", Michael Scuse, acting US secretary of agriculture, said.
For corn, the estimate for inventories was trimmed by 800,000 tonnes to 124.5 million tonnes, on "higher corn feed in the EU and India", and lower hopes for the South African harvest.
"South Africa corn production is lowered 500,000 tonnes as higher reported area is more than offset by reduced yield prospects," Scuse said.
But potentially the most significant revisions were cuts of more than six million tonnes to the estimate for world soy production, following drought damage to South American producers.
The Brazilian harvest, the world's second biggest after America's, was downgraded by 3.5 million tonnes to 68.5 million tonnes, a deeper reduction than the market had expected, "due to lower projected yields resulting from hot, dry conditions in the southern states".
The Argentine harvest was downgraded by 1.5 million tonnes to 46.5 million tonnes as, "despite improved weather in recent weeks in much of the country, lower yields are projected due to continued warm, dry weather through February in north-eastern growing areas".
Scuse also highlighted a downgrade of 1.4 million tonnes to five million tonnes in the estimate for output in Paraguay, the fourth-ranked exporter, "due to the effects of drought".
"With precipitation for November through February at the lowest level in over 25 years, soy production is projected 34% below early season expectations," he said.
However, the data received a mixed reception from analysts after the estimates for world corn and soy inventories were not reflected in forecasts for US stocks, with figures for the American balance sheets left untouched.
Scuse said: "US soy exports are unchanged at 1.275 billion bushels (34.7 million tonnes) as reduced supplies in South America raise prices, reducing global import [demand]."
The estimate for US corn stocks at the close of 2011-12 was left unchanged too, at 801 million bushels, dashing expectations of a trim to 785 million bushels.
Broker FC Stone said that the report had "very little ammunition for bulls", with data for US corn left "entirely unchanged... despite an expected stocks decline".
Rabobank analysts said: "The Wasde was bearish for corn, as the USDA left the US balance sheet completely unchanged."
Benson Quinn Commodities said the report "could offer a little bit of a negative to the corn market".
Soy prices indeed closed marginally lower in Chicago, down US$0.75 at US$13.37 a bushel for May delivery. However, corn futures for May ended 1.5% higher at US$6.45 a bushel, boosted by rumours of US exports to China.
And the Wasde report was seen as more supportive to wheat, in cutting stocks by 20 million bushels, "based on shipments and sales to date" this season. Chicago wheat for May closed up 1.3% at US$6.43 a bushel.