October 20, 2006

 

US corn production declines

 

 

A crop production report projected a cut in corn harvest from 11.1 billion to 10.9 billion bushels, reported USDA.

 

The decline in US corn production was attributed to a slight decline in yield from the September estimate of 154.7 bushels per acre to 153.5 bushels per acre, and an 800,000-acre drop in harvested acres.

 

The latter was a result of farmers chopping more corn for silage to make up for poor pasture conditions in the western corn-belt, informed an analyst during a CBOT teleconference.

 

Jim Bower, president of Bower Trading viewed corn number as the biggest shock. With the carryout below 1 billion bushels, it changed the dynamics and the USDA reduced ending stocks for corn from 1.22 billion bushels to a razor-thin 996 million bushels. Wheat too faced a similar fate falling from 429 million to 418 million bushels.

 

The tight supplies we had last month just got tighter for corn and wheat, said Don Roose, president of US Commodities. He said they were in a potential rationing situation.

 

Bower and Roose believed the market must buy another 4 to 5 million acres of corn by next spring. To do so, corn prices could reach anywhere from US$3.30 to US$3.50 per bushel before the end of the year.

 

Analysts believe corn and wheat acres could increase at the expense of soy.

 

The estimate for harvested soy acres this year was increased by 600,000 in last week's report while for soy production from 3.09 billion bushels to 3.18 billion bushels.

 

The USDA also projected a better soy yield, from a US average of 41.8 bushels per acre last month to the current estimate of 42.8 bushels per acre, and boosted ending stocks from 530 million to 555 million bushels.

 

Illinois yield projections stood at 171 bushels per acre for corn, down three bushels from last month's estimate, and 51 bushels for soy, up three bushels from one month ago.