July 11, 2007

 

US 2007/08 corn ending stocks seen to increase sharply; world corn output stable 

 

 

US corn ending stocks for the 2007/08 crop year are expected to drastically jump due to the hike in planted acreage reported in June, with old-crop ending stocks also expected to increase but by a smaller amount, analysts said.

 

The US Department of Agriculture is scheduled to release updated supply and demand data Thursday at 8:30 a.m. EDT (1230 GMT).

 

The average 2007/08 corn ending stocks estimate is 1.418 billion bushels, sharply above the 997 million bushels forecast in June, according to a survey of 15 analysts by Dow Jones Newswires.

 

The increase in ending stocks is due to the expansion of planted acreage, said Shawn McCambridge, senior grains analyst at Prudential Financial. "The USDA will stay with their earlier yield estimate of 150.3 bushels per acre because the only thing the USDA has to draw on is the increase in acres," he said.

 

The first field survey of the crop isn't until August, so there is probably not enough information to change the yields at this time, especially given an expected increase in harvested acreage this year, he said. McCambridge estimates 2007/08 stocks at 1.195 billion bushels, the lowest of any analyst surveyed.

 

In June, the government reported that US farmers would plant 92.888 million acres of corn this year, well above the 90.454 million estimated in March.

 

There should be no change in the government's yield and in any other fundamental factors beside the acreage increase, so it comes down to what the harvested acres will be later in the year, said Brian Hoops, president of Midwest Market Solutions, in Yankton, S.D. Given an expected increase in production, ending stocks should return to levels well above 1 billion bushels, with Hoops estimating ending stocks at 1.368 billion bushels.

 

Old-crop ending stocks are estimated at 1.031 billion bushels, up 44 million from the 987 million bushels estimated in June, according to 14 analysts surveyed.

 

The quarterly stocks report in June suggests that feed usage wasn't as large in the third quarter as expected, said McCambridge, who pegs 2006/07 stocks at 1.037 billion bushels.

 

In June, the government estimated quarterly corn stocks at 3.534 billion bushels, compared to 4.362 billion last year.

 

The influence of distillers' grains coming into the feed sector probably trimmed the amount of corn used as animal feed with feed usage of corn down 50 million bushels, McCambridge said. Distillers' grains, a byproduct of corn-based ethanol production, can be used as livestock feed. Although animal numbers have recently increased, the quarterly stocks number indicated that corn feed usage were less than expected, he noted.

 

Not every analyst sees stocks increasing from the 987 million estimated by the USDA in June.

 

Any decrease in feed usage was probably offset by the continued strength in US corn exports, said Hoops. The pace in corn sales to overseas buyers remained strong in the third quarter, he said. Hoops pegs old crop ending stocks at 981 million bushels, among the lowest of any analyst surveyed.

 

Beyond the projected increase in US production from the larger planted acreage, there should be little change in world corn numbers, McCambridge and Hoops said.

 

World production numbers will be unchanged with the exception of the US and ending stocks will increase to reflect that, Hoops said.

 

Although China, a major competitor in world corn export markets recently increased its estimate of corn production to 149 million tonnes from a previous estimate of 147 million, according to the National Grains and Oilseeds Information Centre, a Chinese government think-tank, it is doubtful the USDA will increase its estimate of Chinese production, McCambridge said.

 

"The USDA will wait one more month before making any changes to Chinese production," McCambridge said. China had some earlier weather problems but have been getting some beneficial rain recently, so the government will wait before trying to "chase" the Chinese estimate, he said.

 

A mixed weather picture in European Union corn-producing countries will limit any changes until August when more is known about the crop, McCambridge said.