July 2, 2008

Global corn production to fall, soy production to rise for 2008-09

Global corn output is expected to fall 2 percent on-year in 2008-09 (September-August) to 771 million tonnes due to flooding in the US Midwest and frost in Brazil, Rabobank said in a report Wednesday (July 2, 2008).

The report said world corn production will lag demand in 2008-09, leading to a 9 percent contraction in corn stocks, plunging them to the lowest level in 35 years.

Rabobank said the current high prices of corn will likely be largely supported in 2008-09, as demand has to be rationed in view of the lower expected production and stocks.

It added some demand destruction may also take place due to the high corn prices, with the likelihood of ethanol plants operating below optimal capacity and livestock culling taking place in the US and other countries.

On soy, Rabobank said global production in 2008-09 will likely rise 9 percent on-year to 238 million tonnes.

It added the current estimate is 2.6 million tonnes lower than an earlier one, as the tightening credit market and high input costs for farming in Brazil and the persistent strikes in Argentina could lead to South American soy plantings falling short of earlier estimates.

However, despite an expected rise in production, low carryover stocks and an expected 2.2 percent on-year consumption growth will actually erode soy stocks further in 2008-09, it said.

Rabobank said soy prices will likely be evenly poised in 2008-09, with adverse weather conditions for soy planting and any sharp rise in corn prices being major influences on price movement.