US soy dominance over corn to continue

 

 

The trend of higher soy prices and lower corn prices in the US should continue given Wednesday's crop estimates from the government and the premium soy prices have over corn could reach a record.

 

"Right now we're 80 cents from the record premium soy have over corn and we can take it out [Wednesday)]," said Rich Feltes, direct of research at MF Global.

 

Higher yields and an unchanged planted acreage figure boosted the US Department of Agriculture's estimate of the US corn crop to what could be the second largest ever. Projected soy supplies -- which could be a record if realized -- still might not be enough because of extremely strong demand for oilseeds.

 

The USDA said the 2009-10 US corn crop is 12.761 billion bushels. This compares to trade estimates of 12.472 billion bushels and the July USDA estimate of 12.290 billion. Output for 2008 was 12.101 billion.

 

Corn yields for the fall harvest were 159.5 bushels per acre, versus 157.1 bushels estimated by the trade and 153.4 forecast in July. Yields were 153.9 in 2008.

 

Ending stocks for the 2009-10 corn marketing year were 1.621 billion bushels, under the 1.701 billion-bushel trade estimate and higher than 1.550 billion July estimate. Hikes in feed, ethanol and exports helped to eat through some of the greater estimated supply.

 

"We're shocked and sceptical at the higher [corn] usage figure," said Dan Manternach, analyst at Doane Advisory Services.

 

While the ethanol industry is starting to revive somewhat, the Feltes and Manternach said the poor fortunes of the livestock industry certainly do not warrant higher feed usage estimates.

 

The analysts spoke at a press briefing sponsored by the CME Group immediately following the data's release.

 

"The carryout is lower than the trade estimate which might be a pleasant surprise, but if [there is suspicion on the figure] corn prices might be under even more pressure," Manternach said.

 

The USDA said the 2009-10 US soy crop is 3.199 billion bushels. This compares to trade estimates of 3.213 billion bushels and the July estimate of 3.260 billion. Output for 2008 was 2.959 billion.

 

Soy yields were 41.7 bushels per acre, versus 42.1 bushels estimated by the trade and 42.6 forecast in July. Yields were 39.6 in 2008.

 

Ending stocks for the 2009-10 soy marketing year were 210 million bushels, below the 221 million-bushel trade estimate and under the July figure of 250 million.

 

The USDA cut exports by 10 million bushels to 1.265 billion bushels and the crush also by 10 million bushels to 1.670 billion, which came as a surprise. "There is no evidence for this," Feltes said, who said US exports are running at a record pace and South American soy supplies are down.

 

Because of the data, both analysts said Chicago Board of Trade corn prices are likely to continue to fall and could set new lows and soy prices will at the very least hold if not rally.

 

The recent cool weather has some market bulls talking about an early frost - that could support corn prices if the crops are not fully developed, but more likely will lift soy prices because soy maturity is late.

 

The USDA made no change on its planted acreage figure for corn, leaving it at 87.0 million acres. Some in the trade expected a cut to acreage because of USDA's resurvey of several states. While the industry might debate USDA's prognosticating abilities for production side, USDA's tally of area is generally seen as accurate because of their resources. "Second-guessing [USDA] is like second-guessing Moses when he came down from Mount Sinai," Manternach said.

 

The USDA also released its estimate of the wheat crop, which was deemed bearish.

 

All-wheat production for the US was put at 2.184 million bushels, above the average trade guess of 2.150 million bushels. July's estimate was 2.112 million. In 2008, winter wheat output was 2.500 million.

 

All winter wheat production for the US was put at 1.537 million bushels, slightly above the average trade guess of 1.531 million bushels. July's estimate was 1.525 million. In 2008, all wheat production was 1.868 million.

 

Other spring wheat production is estimated at 548 million bushels, above the average trade guess of 523 million. July's estimate was 506 million. A year ago output was 547 million.

 

Durum output is estimated at 98 million bushels, above the average trade guess of 85 million. July's estimate was 81 million. A year ago output was 85 million.

 

Ending stocks were at 743 million bushels, over the trade estimate of 737 million bushels and the July figure of 706 million.