June 9, 2004

 

 

No Surprises Expected In June Supply/Demand Projections For Corn

 

Thursday's June supply and demand report from the U.S. Department of Agriculture is not expected to cause much of a stir in the corn futures market, as analysts anticipate only a minor tweak to old- and new-crop balance sheet line items.

 

Analysts surveyed expect 2003-04 U.S. ending stocks to come in mostly unchanged from May's 806 million bushel figure. Adjustments to new-crop items will be tied to possible revisions in old-crop ending stocks, with analysts looking for the USDA to await end-of-the-month acreage data before adjusting 2004-05 planting and yield outlooks.

 

The USDA's report is scheduled for release at 0730 CT (1230 GMT) Thursday.

 

Industry participants anticipate if the USDA makes changes to the 2003-04 balance sheet, it will revise usage figures, with the potential for a modest 10 million- to 15 million-bushel increase in corn use for ethanol, the one area that could be adjusted upward amid a record ethanol processing pace. Currently, the USDA projects corn use for ethanol at 1.195 billion bushels. However, many analysts contend that exports of 2.050 billion bushels look overstated and a possible reduction may be in order.

 

The USDA has been pretty aggressive in its adjustments to its usage numbers in previous reports and may be willing to await the release of the quarterly stocks reports at the end of the month before making any revisions at this point, said Shawn McCambridge, analyst with Prudential Securities in Chicago.

 

Bill Nelson, associate vice president at A.G. Edwards & Sons in St. Louis sees the potential for a 50 million bushel reduction in exports. The USDA's revisions to exports in previous reports were too aggressive, he said. Based on weekly export inspections through June 3, shipments total 1.4 billion bushels, so the market will need to average near 46 million bushels a week in the last 12 weeks of the marketing year to meet USDA's projection, added Nelson.

 

On the world scene, the USDA is seen holding steady on projections except for any adjustments to U.S. balance sheet items

 

WATCHING FOR ANY REVISIONS IN 2004-05

 

In the second release of supply and demand tables for the 2004-05 marketing year Thursday, traders do not anticipate any surprising changes from the May supply and demand projections. However, traders will pay close attention to potential revisions, particularly with global coarse grain supplies at their lowest levels in nearly 30 years.

 

"The USDA has no statistical leg to base changes in acreage and yields for the 2004-05 crop at this point until after you find out what has actually transpired in the fields in the past few weeks, particularly ahead of the June 30 acreage report," said Mike Zuzolo of Risk Management Commodities Inc. in Lafayette, Ind.

 

New-crop usage data looks reasonable, and the USDA will probably keep the 145-bushel an acre yield and the March 31 plantings numbers to balance projections in the report, McCambridge said. The USDA forecast corn planted acreage at 79.0 million acres in its March prospective plantings report.

 

"I'd be shocked if USDA addresses the issue of acreage and yields at this time," said Joe Carney, analysts with STA Trading Services in Memphis.

 

The average of analysts estimates for 2004-05 ending stocks were 744 million bushels from a range of 702 million to 791 million bushels.