March 11, 2011

 

USDA projects stronger Brazilian soy, corn yields

 

 

US forecasters eased concerns over low grain stocks on Thursday (Mar 10), slightly raising estimates for global supplies of corn, wheat and soy, while leaving estimates for local supplies mostly unchanged.

 

USDA in its monthly crop report still forecasts tight supplies for staple crops, yet sees inventories stabilising as South American countries begin their harvests.

 

While the report does not erase fears of global food shortages this year, futures markets, which have soared to more than two-year highs on supply concerns, opened lower.

 

"The world numbers are a bit negative across the board," said Don Roose, president of US Commodities in Des Moines, Iowa.

 

Futures prices at the CBOT plunged on Thursday's open on the report, although the markets quickly trimmed the losses.

 

Corn for March delivery was down 1.6% to US$6.84 per bushel in recent trade, while March wheat was down 1.7% to US$7.19 3/4 after earlier trading down by twice that much. Soy futures were mixed after dropping more than 2% on the open.

 

The biggest loser was rice, as the most-active May contract fell 3.7% or US$0.50, the daily trading limit, to US$13.05 after the government hiked projected world supplies by 5%.

 

Agriculture companies, particularly fertiliser makers, also tumbled. Potash Corp. of Saskatchewan (POT) was down 3.5% to US$52.18 a share.

 

The only major agriculture commodity initially gaining on the report was cotton, as futures recently traded up 0.5% at US$2.054 a pound on the Intercontinental Exchange. Stocks for farm equipment manufacturers fell on Thursday's report with Deere & Co. (DE) down 2.6% at US$87.19 a share on heavy volume.

 

The government increased the projected global, end-of-season wheat inventories by 2.3% to 181.9 million tonnes, noting better-than-expected crops in Argentina and Australia, where robust crops in western parts of the country made up for flood losses in the east.

 

The increase "is a bearish jab to gut of wheat market," R.J. O'Brien analyst Rich Feltes told clients, although he added that the bigger issue for the market is northern hemisphere production this year, which has yet to be determined.

 

US wheat supplies are forecast slightly higher than a month ago, which is expected to pressure futures prices. Wheat was the first grain market to rally in 2010, thanks to a historic Russian drought. But the USDA said Thursday that Russia "appears to be meeting its wheat needs" after implementing an export ban, and that the ample Australian supplies will hurt US wheat exports.

 

The government raised its US projection for wheat supplies at the end of crop year on May 31 by 3% to 843 million bushels. It also noted that smaller markets around the world were reducing their purchases due to high prices.