September 11, 2010

 

 

Huge demand and a smaller-than-expected harvest will bring the tightest US corn supply in 15 years, the government said Friday (Sept 10), but world wheat supply was not as low as expected amid drought.

 

The USDA said the US corn stockpile would shrink to 1.116 billion bushels by the end of 2010/11, down 19.5% in a year. The stocks-to-use ratio of 8.3% would be the smallest since 1995/96.

 

With the fall harvest under way, USDA cut its US corn crop forecast by 2% to 13.16 billion bushels, a bit below forecasts for 13.2 billion bushels, due to hot, dry late-summer weather that helped prices rise by nearly 17% since August.

 

USDA cut its forecast of the world wheat crop for the fourth month in a row, but its forecast of 643 million tonnes was not as low as expected. USDA lowered its forecasts for Russia's wheat harvest by 2.5 million tonnes from August and the European Union's by 2.4 million tonnes.

 

USDA lifted its forecast for the US soy crop by 1% from its August estimate.

 

Corn futures prices rose on the CBOT after the USDA forecast, while wheat futures slipped and soy fell too.

 

The world wheat crop would be the smallest in three years, since fears of a food shortage were rampant. But supplies are far larger than in 2008 and USDA raised its forecast of 2010/11 wheat end stocks by nearly 2%, to 177.79 million tonnes, due to larger supplies in Canada.

 

US farmers "are in an economic sweet spot" of large crops and high prices "and we think this will persist well into 2011. Downstream users, however, such as meat processors and baking companies and food manufacturers will likely labour under higher input costs," said analyst Mark McMinimy of Washington Research Group.

 

CBOT December corn futures <CZ0> rose US$.044 to US$4.74-3/4 a bushel at midday, with the tighter supply forecast buffered by a lower-than-expected weekly export sales total.

 

USDA estimated the farm-gate price for this year's corn crop would average US$4.40 a bushel, the highest ever. Season-average prices for wheat and soy would be the third-highest. USDA said higher feed prices will discourage beef, pork and poultry production in 2011. It said per-capita meat consumption of 206.5 lbs would be 1.2 lbs lower than forecast in August.

 

US wheat exports will rise by 4%, to 1.25 billion bushels, USDA said, because of less competition from Europe. The reduced USDA forecast would still make the US corn crop the largest on record. The stocks-to-use ratio of 8.3% would be the lowest since 5% in 1995/96.

 

With the fall soy harvest underway, USDA forecast a record crop of 3.483 billion bushels, up 1% from its August estimate. Despite near-record exports of 1.485 billion bushels, end stocks would more than double to 350 million bushels. Traders expected USDA to lower its crop forecast by 1% and forecast end stocks of 285 million bushels.