July 9, 2010

Traders become less optimistic about US corn crop outlook

Hopes that US corn yield per acre will be lofty this year are undermined by concerns that heat and dryness in late July will hurt production, according to traders and analysts.

Rich Feltes, research director for MF Global, said he started the spring with a 167 bushel-per-acre projection for this year's corn crop, dropped it to 165 bushels last week and this week to 162 bushels per acre.

"I'm down to 162 for several reasons. Number one, we've had several declines in corn ratings at a time seasonally we should have increased," Feltes said.

The USDA's current estimate is for corn yield is 163.5 bushels per acre, below last year's record 164.7. The near-perfect start to the corn sowing season led to plants developing one week to 10 days ahead of normal, but rains in June have since cast a shadow over yields.

The USDA's acreage report on June 30 reduced its estimate of the area to be planted with corn by 928,000 acres (375,600 hectares) from its March estimate, and 1.4 million short of the trade consensus.

Feltes said that after talking to people who have seen the crop, they are reporting more uneven crop growth because of the excessive rains in June.

American farmers started seeding corn early and kept up a record setting planting pace which usually is a recipe for potential bumper corn yields.

"We had a very optimistic view of the crop, but now we are more concerned with a downside than upside revision in yield," said Nick Kouchoukos, vice president of products for Lanworth, a private commodities analytics company known for its use of satellite technology to forecast crop production.

"There is a very good reason to be nervous about yield due to weather conditions and crop ratings. There is a possibility that yield expectations will have to come down," he said.