April 11, 2011

 

US maintains corn forecast

 

 

The USDA maintained its forecast for tight corn stocks on Friday (Apr 8), altering outlooks for further contracting as livestock feeders choose wheat over costly corn.

 

The USDA reported marginal adjustments to the outlook for grain supplies for the world's biggest exporter on Friday (Apr 8). US corn stocks at the end of the year would shrink to 675 million bushels, the lowest in 15 years, the USDA said. That was unchanged from the March estimate.

 

Corn prices fell on the CBOT following the USDA report. Corn for May delivery sold for US$7.61 a bushel at mid-morning, down 0.2%. Corn hit a record US$7.73-1/4 on Thursday (Apr 7). May soy was up 1.3% to US$13.81-1/4 a bushel, and May wheat was steady at US$7.73 a bushel.

 

"I do not think it tempers the bullishness that we have had in the market on the fundamental factors because eventually we have to account for the extra corn that we used," said Shawn McCambridge, an analyst with Prudential Bache Commodities.

 

It was the second month in a row that USDA pegged corn stocks at 675 million bushels. Analysts expected a cut to 586 million bushels, given a report last week that showed stocks were dipping faster than expected due to strong demand.

 

In updating its forecast, USDA slightly raised its forecast of corn used in making ethanol and raised its estimate of Chinese corn imports by 500,000 tonnes. It said hog and poultry growers will substitute wheat for corn and prevent stocks from shrinking further.

 

The US is the world's largest farm crops exporter, so tight supplies will maintain pressure on grain prices around the world. Bumper US crops are vital this fall. Farmers say they will plant enough land to produce a record corn crop and the No. 3 soy crop.

 

Six analysts surveyed by Reuters at the start of the week saw prices topping US$8 a bushel by mid-June.

 

The USDA said attractively-priced wheat will replace corn in hog and poultry rations, particularly in the South, where winter wheat will be ready for harvest in late spring. "Winter wheat conditions are especially favourable in Arkansas and North Carolina, where wheat feeding is an alternative for poultry and hog producers," said the USDA.

 

On a pound-for-pound basis, soft red winter wheat is cheaper than corn and is far more abundant. There is a four-month supply in the warehouse. In addition, early-maturing corn in Southern states could come into the market in August and pad US supplies, the government said.

 

With wheat becoming available, the USDA lowered its forecast of corn used in livestock feed by 50 million bushels. That offset its forecast of slightly larger use of corn to make fuel ethanol.

 

China is forecast to import 1.5 million tonnes of corn this year, said the USDA. The previous estimate was one million tonnes. "The increase in expected China imports reflects the short-term decline in world corn prices that created a buying opportunity for Chinese buyers. No official confirmation of such purchases has yet been made," said the USDA.

 

Exporters sold a huge amount of 1.25 million tonnes of corn last month to unidentified buyers, widely believed to be China. The USDA did not change its forecast of soy supplies. It forecast 140 million bushels, a little over a two-week supply, at the end of the marketing year. It would be the third year in a row of tight supplies.