June 27, 2008

     

Analyst sees US corn production down 14.5 percent, soy stocks at dangerous levels

Storms and floods across the Midwest this spring will significantly cut planted acres and slash US corn production by 14.5 percent to just 11.2 billion bushels from 13.1 billion in 2007, an analyst said Thursday (June 26, 2008).

 

That estimate is also below the USDA's 2008 projection of 11.7 billion bushels and average yield of 149 bushels per acre.

 

Peter Meyer, agricultural products specialist with Lehman Brothers, said in a conference call that the drop, coming at a time when corn demand is soaring, would be difficult to swallow.

 

His lower estimate for 2008 is based on a yield of 145.5 bushels an acre, down from an average 151.1 bushels last year and total production of 13.1 billion bushels.

 

Corn harvested area will drop significantly to 77 million acres this year, down from the USDA's current estimate of 79 million and from the 86 million that were estimated to have been planted back in March, Meyer said.

 

The USDA will issue an update to the Midwest flood situation in its June 30 acreage report, and officials are currently re-surveying farmers since the floods occurred after the initial surveys were taken. But given the short timeframe and the likelihood that many producers will be unreachable, further updates in July and again in August will be needed to more accurately assess the situation, he explained.

 

The American Farm Bureau said Wednesday the floods have caused about US$7.5 billion in losses so far in the Midwest.

 

The floodings in the Midwest this year could be worse than the floods in 1993, given that it occurred in three weeks later in the year than this year's flood. The earlier floods this year provided less time for crops to develop strong roots, Meyer said.

 

Meyer also rated soy production 6.5 percent lower than USDA's estimates of 3.1 billion bushels, with yields at 40.5 bushels an acre compared to 42.1 acres estimated by the USDA. 

 

The lower projection is based on a shorter growing season for beans due to adverse weather this spring as farmers in some areas struggle to plant shorter season crops after flooding.

 

Continued strong demand from China is expected to keep US soy supplies tight, he said. Although old-crop soy exports for the week ended June 19 were a negative 268,100 tonnes, as reported by USDA Thursday morning, this is not due to slack demand.

 

"Bean exports are negative because everybody's moved the purchases to the new-crop November contract, which tells me that export demand has not dropped but bean deliveries are being pushed because there are no more beans left," said Meyer.

 

The USDA estimates 2008-09 soy ending stocks at a tight 175 million bushels, and Meyer said inventories as of June 1 were likely below 100 million, which is dangerously low territory.