November 9, 2009

Analysts expect a slight reduction in the projected size of the US corn crop and 2009-10 ending stocks when the US Department of Agriculture issues its supply and demand report next week.

 

The USDA is scheduled to issue supply and demand estimates and updated crop projections Tuesday at 8:30 a.m. EST. While any USDA supply and demand report can have a significant effect on the market, some analysts say that uncertainty about this year's crop means it could be January or later before the market has a clear picture of 2009 output. Only 25% of the crop was harvested as of Sunday.

 

"This report is going to be a little different," said Shawn McCambridge, senior grains analyst for Prudential Bache. "Last year, we had more than half the crop harvested, it's still going to remain very uncertain until we get deeper into this harvest on whether or not these numbers are accurate."

 

Analysts on average project the corn crop at 12.995 billion bushels, which would be down slightly from the USDA's October estimate of 13.018 billion. Last year's crop totalled 12.101 billion bushels.

 

The 24 analysts' estimates ranged from 12.674 billion to 13.400 billion bushels.

 

The average yield estimate was 163.7 bushels per acre, down from the October USDA estimate of 164.2 bushels per acre but still well above the 2008 yield of 153.9 bushels.

 

The range of analyst estimates was 159.8 bushels to 165 bushels per acre.

 

Those who see a smaller crop point to the lousy weather that hit the US Corn Belt in the final weeks of the growing season. Traders say that frost caused some crop losses, and that soggy weather has caused quality issues as well.

 

The harvest is far behind schedule, adding to the uncertainty surrounding the crop. Although the weather has been better in early November, an abundance of wet corn could keep progress sluggish.

 

"Due to these yield/drying costs farmers may decide to leave corn in the field longer to dry down, but this could increase the risk of in-field losses," said Alex Bos, analyst with Macquarie Bank, who projected total production of 12.931 billion bushels. "Farmers are clearly in a difficult position with such a wet crop this year."

 

But others say delayed harvest is not a major concern for total output and that early reports indicate a strong crop.

 

"You're hearing some good yields out there," said Chad Henderson, analyst for Prime Ag Consultants in Wisconsin. He projected total output of 13.085 billion bushels with a survey-high yield of 165 bushels per acre.

 

Mike Zuzolo, analyst of Global Commodity Analytics and Consulting, said that if one of his estimates was off the mark it was likely to be his yield projection of 162.8 bushels per acre.

 

"The yields are holding up very well and above producers' expectations from what I'm hearing," he said.

 

Some analysts have also noted a historical tendency for crop projections that increase between September and October to also increase into the November report.

 

Some analysts, including Zuzolo and Sid Love, of Kropf and Love Consulting, expect the USDA will revise its acreage lower. Love, who projects a crop of 12.956 billion bushels despite a yield of 164 bushels per acre, expects acres to drop by 300,000 bushels.

 

 

Analysts are on average expecting a slight reduction in the 2009-10 ending stocks projection, due in part to the lower production estimate.

 

The average projected carryout in the survey was 1.650 billion bushels, with estimates ranging from 1.482 billion to 1.909 billion bushels.

 

The October estimate was 1.672 billion bushels, and 2008-09 ending stocks were 1.674 billion bushels.

 

Some analysts are expecting modest changes to the demand side of the equation.

 

"The trade is probably not going to mess with exports too much or ethanol too much, because you could make an argument either way," said Zuzolo, who projects ending stocks of 1.486 billion bushels.

 

But a lot of traders are noting that export demand has been weak in recent weeks and is not on pace to meet current USDA projections. The weaker export demand has been attributed variously to higher prices that have made US corn uncompetitive, uncertainty about quality or a simple lack of corn in the supply pipeline.

 

"Their [USDA's] export number looks pretty high," Henderson said. "So whether they make the change in here on this November report or they wait to make their adjustments in the January crop report, I think the trend of a little bit bigger crop, and a little bit smaller on the demand, especially on the export side of it, needs to show up at some point.

 

He projects ending stocks of 1.739 billion bushels.

 

Bos is among those noting the recent strength in the export sector, calling ethanol demand "the bright light of corn consumption." But he also noted that production has been slowed due to the tight near-term supplies, and left ethanol demand unchanged at 4.2 billion bushels.

 

Analysts said there could be little change to the world balance sheet, as uncertainty remains in several areas, including Argentina and China.