May 11, 2009

Analysts expect the government will make little if any change to US corn ending stocks for 2008-09 in Tuesday's (May 12) supply and demand report, while lower production and increased usage are expected to result in a lower carryout for 2009-10.

The US Department of Agriculture will release the supply and demand report Tuesday at 8:30 a.m. EDT (1230 GMT).

The average analyst estimate for the USDA's 2008-09 ending stocks projection is 1.711 billion bushels. That would be up from last month's government estimate of 1.700 billion bushels, but only four of the 15 analysts surveyed by Dow Jones Newswires projected an increase.

The range of analyst estimates was 1.645 billion bushels to 1.879 billion bushels.

Seven analysts projected ending stocks would be left unchanged.

Some analysts, citing strong export sales above 1 million tonnes for the past several weeks, expect the USDA to increase its export projection. Sales dropped to about 500,000 tonnes in the most recent week, but even at that pace exports would top the current USDA estimate.

"We could have just this steady half-million tonne number and still bump it up 50 or 100 million [bushels]," said Shawn McCambridge, senior grains analyst for Prudential Bache.

For this report he expects the export sales estimate to increase by 50 million bushels, putting carryout at 1.650 billion bushels.

Farm Futures also projects an increase in exports, but analyst Arlan Suderman said that should be offset by a cut in feed demand. Farm Futures projects ending stocks of 1.710 billion.

Analysts expect a more dramatic shift lower for the USDA's 2009-10 carryout projection, although they caution that new crop ending stocks are a moving target that will be determined by many factors.

The trade expects the government's new crop carryout projection to reflect a smaller crop due to reduced acreage and potentially reduced yield because of the crop's slow planting pace this spring.

The 2009-10 ending stocks are projected at 1.383 billion bushels. Analysts' estimates ranged from 1.129 billion to 1.720 billion.

"I suspect with the late planting their going to lean down a little on the yield," said Marty Foreman, analyst for Doane Advisory Services. "They have in the past, with the slow planting, made some kind of adjustment. It's not going to be huge, it might be a bushel or two from trend."

Sid Love, analyst for Kropf and Love Consulting, said he expects the USDA will estimate lower crop production "based on a little bit lower yield because the crop is late going in." Love, who projects new crop ending stocks of 1.367 billion bushels, and other analysts expect the USDA won't yet change its acreage from its March 31 planting intentions report.

Some analysts expect increased usage to also cut into the 2009-10 endings stocks. Foreman, who projects the carryout at 1.190 billion bushels, said he expects usage to increase by 500 million to 600 million bushels, due to higher ethanol usage and "a little stronger" export demand.

"We're still banking on a significant recovery in exports as we move into the next marketing year and a gradual increase in feed demand," said Farm Futures' Suderman, who puts 2009-10 ending stocks at 1.205 billion bushels.

Prudential Bache's McCambridge said the new crop estimate from the USDA will serve as "kind of a reference" going forward but that there are a lot of variables, including expected Environmental Protection Agency rulings and the fate of the federal renewable-fuel standard that will affect the ultimate carryout.

Analysts expect ethanol demand to continue to grow because of the federal renewable fuels mandate, but they note that corn-based ethanol is under pressure economically and from some environmentalists.

McCambridge added that on the world balance sheet, corn could see a "decent drop" in carryout for next year, thanks to an increase in industrial use and as feeders switch from feed wheat back to corn.