August 11, 2004

 

 

Analysts Forecast 2004 US Corn Crop At 10.78 Billion Bu

 

Analysts surveyed anticipate a substantial increase in the U.S. Department of Agriculture's current yield and production forecast in its August crop report scheduled for release Thursday.

 

The average of analysts' estimates projects a crop size of 10.784 billion bushels with a yield of 147.0 bushels per acre. The averages ranged from 10.622 billion to 11.007 billion bushels for production and 145.0 to 149.6 bushels for yields. The USDA currently pegs the crop at a record 10.635 billion bushels with a historically high yield estimate of 145.0 bushels an acre.

 

The old assumption that big crops get bigger is in full effect, with early spring plantings, moderate summer temperatures and normal rainfall boosting projections as high as 11 billion bushels. The USDA currently rates the corn crop at 76% good to excellent, its highest rating at this date since 1994. The boost in output expectations is also attributed to a 2.2 million-acre jump in planted acres.

 

The August report is based on field surveys of stalk and ear counts and at this point is not enough to project an 11 billion-bushel crop, said Shawn McCambridge, senior grains analyst at Prudential Securities in Chicago.

 

Analysts surveyed for the report, due Thursday at 0730 CT (1230 GMT), are mostly in agreement that the USDA will raise its production outlook, but to what degree remains a topic of discussion. The general consensus calls for an increase of roughly 140 million bushels, as favorable summer weather conditions benefited the bulk of crops across the Midwest.

 

However, crops in the northern corn belt remain an area of concern as excessive moisture and cool temperatures delayed plantings and slowed crop development, leaving crops susceptible to frost threats and expected to temper the national average yield. Wetness has been a drag on yields in previous years as crops suffer from an inability to reproduce nitrogen.

 

Nitrogen leaching from crops into water and then evaporating is a concern, as crops facing lost nutrients run the risk of smaller yields.

 

Bill Nelson, associate vice president at A.G. Edwards and Sons in St. Louis, projects the crop at 10.8 billion. He said he had observed the best corn populations he has ever seen on a recent tour of Midwestern fields from St. Louis to northwestern Ohio, and contends that the number of ears is highly correlated to yields. He also reported finding a lot of disappointment as he noticed a high amount of poor ear filling.

 

Mike Zuzolo of Risk Management Commodities Inc. in Lafayette, Ind., provided a contrarian view to production outlooks, stating that most private estimates are not based on actual kernel counting, but an issue of statistics based on crop ratings. He contends these are a poor predictor of yields.

 

Zuzolo added that the 7% increase in ratings from 2003 is nothing statistically spectacular, and he does not foresee the final production figure to be much higher than the USDA's current output projection.

 

SUPPLY AND DEMAND

 

Traders and analysts do not anticipate many changes to the 2003-04 corn balance sheet, with the only adjustments seen to old-crop line items a cut in export projections. Based on the USDA's export inspections report as of August 5, accumulated exports totaled 1.717 billion bushels. This is well below the level needed to reach the USDA's current projection of 1.950 billion with only three weeks remaining in the 2003-04 marketing year.

 

The old crop could see a cut of 50 million bushels off exports as the pace of export demand just isn't there, said McCambridge.

 

Analysts say the other line items are pretty reasonable and do not expect any changes.

 

The new-crop balance sheet is expected to experience some modest adjustments in relation to the change in 2004-05 production and beginning stocks. The larger crop size could see ending stocks swell above the key 1 billion-bushel mark.

 

The 2004-05 supply and demand table should see some increase in output and the USDA may trim its 2.1 billion-bushel export forecast in light of the drop in exports this summer, said Nelson.

 

But with China expected to re-enter the export arena, the USDA may take a more conservative outlook at demand, he added.

 

McCambridge expects the increase in beginning stocks will be nearly offset by a 25 million-bushel increase in feed and residual, as well as a 20 million-bushel spike in food, seed and industrial attributed to ethanol expansion.