November 10, 2005

 

USDA seen nudging up November corn production
 

 

Traders and analysts expect the government to nudge up its estimate of the 2005-06 US corn crop when the USDA issues its crop production and supply-demand tables Thursday.

 

This will be the last production report for the year. The USDA will issue its final numbers on the 2005-06 crop in January.

 

The range of expectations runs from 10.82 billion on the low side to 11.09 on the high side, for an average crop estimate of 10.965 billion bushels. In October, the USDA raised its projection to 10.857 billion bushels, as yields were larger than expected in many dry areas of the Midwest.

 

"There seems to be some room to move it (crop production) higher-whether it's going to be at 11 billion or over 11 billion bushels remains to be seen," said independent agricultural analyst John Kleist.

 

Shawn McCambridge, senior grains analyst at Prudential Financial in Chicago, looks for a 10.952 billion-bushel crop.

 

Others also are expecting an increase in the crop size. FCStone recently issued a 11.078 billion-bushel estimate. Informa Analytics reportedly came out with a 10.979 billion projection.

 

"I can't disagree with the 11-billion-bushel numbers, but we can also do that in January. So I think they edge it up this time, but I don't think they want to jump to the final number in November," McCambridge said.

 

Dale Durchholz, senior market analyst at AgriVisor Services in Bloomington, Illinois, looks for a slightly smaller production estimate of 10.817 billion bushels, due to higher than expected field losses in some areas.

 

With the harvest now over 90 percent complete, attention has now shifted to demand for US corn, rendering this crop production report a bit less meaningful.

 

"A little bit more, a little bit less-it doesn't really matter unless we get demand going," Kleist said.

 

Concerns over bird flu cutting into demand for US feedgrain exports and competition from other sources such as feed wheat have been holding exports down a bit, he noted.

 

"I don't think there's any room to raise exports. In fact, I think there's room to lower it but it's early in the marketing year," Kleist said.

 

The USDA estimates 2005-06 corn exports at 2 billion bushels.

 

McCambridge agrees that bird flu has the potential to hurt export demand, though it will take time to assess the situation to see if the flu keeps spreading or if preventative measures being taken will halt its spread. "That'll take time to develop," he said.

 

But while bird flu has been in Southeast Asia now for two years, corn consumption there has increased during that time, Durchholz explained. "It really hasn't impacted feedgrain demand in a big way."

 

He sees bird flu worries having more of an "emotional" effect on the market now.

 

Meanwhile, traders may be interested to see if the USDA alters ethanol demand after leaving its estimate unchanged in recent reports.

 

"The only thing that could possibly help (carryover) is if the USDA raises ethanol for domestic usage," Kleist said. However, ethanol use has been unchanged at 1.5 billion bushels in the last three crop reports, after being lowered in the July report.

 

"So, that's not a 100 percent guarantee (that the USDA will raise ethanol use in November)," he said.

 

The corn ending stocks estimate is expected to average 2.28 billion bushels, up slightly from 2.22 billion in October, the Dow Jones Newswires survey showed.

 

Kleist looks for 2005-06 ending stocks to increase to 2.3 billion bushels, from 2.2 billion in October, though it depends on what, if any, changes the USDA makes to demand.

 

McCambridge expects ending stocks at 2.29 billion bushels, reflecting slightly higher production and an increase in feed and residual use by 25 million bushels amid low corn prices.

 

Overall, analysts are looking for minor changes to the corn production number this time around.

 

"I think probably the October number was a pretty good number," said Durchholz. "And, yeah, we could go up a little from it or we could go down a little bit from it.

 

Kleist agreed, "It's really irrelevant, except from a psychological standpoint."