November 10, 2010

 

US corn estimates down 1% on adverse weather

 

 

The US corn crop will be 1% smaller than the forecast shown a month ago, after flooding in June and hot, dry weather in August cut Midwest yields for a third straight month, the government said.

 

Production will total 12.54 billion bushels, down from 12.664 billion projected a month ago and less than last year's record 13.11 billion, the USDA said in a report. Other analysts had placed their estimates at 12.542 billion bushels.

 

"The hot weather and flooding resulted in lower yields," said an analyst. "We have yet to see a reduction in corn demand. We will have to see a slowdown in demand."

 

Before the start of trading on CBOT, a report was released stating that corn futures for March delivery fell by US$0.025, or 0.4%, to US$5.993 a bushel yesterday. The most-active contract has increased by 60% since June 30 as bad weather affected crops.

 

Meanwhile, today's estimate is the fourth for this year's crop based on farmer questionnaires and a USDA survey of about 1,900 fields in the Midwest.

 

Meat companies such Tyson Foods Inc. and Smithfield Foods Inc may face increased expenses due to decreased supplies in corn. Besides them, makers of corn-based ethanol such as Valero Energy Corp., Poet LLC, and Archer Daniels Midland Co. may also see margins squeezed.

 

Parts of the Midwest received the most rain in June since 1960. The rain damaged root development and yield potential, said another analyst. In July and August, temperatures in Iowa, Illinois and Indiana were the fifth-warmest since 1960, restricting movement of sugars and starch into kernels, he said.

 

"Corn yields usually suffer when it's too hot," Brugler of Brugler Marketing said. "We will not solve the supply problem until next year's harvest."

 

The USDA decreased its yield forecast from 155.8 bushels per acre last month to 154.3 bushels whereas analysts estimated an average 154.5 bushels in contrast to last year's record yield of 164.7 bushels.

 

The USDA's prediction of farmers' harvest of 81.263 million acres this year remains unchanged from last month.

 

Unsold US supplies on September 1, before next year's harvest, will total 827 million bushels, compared with the month-ago forecast of 902 million and 1.708 billion a year earlier, the USDA said. Analysts expected 831 million bushels.

 

World production in the year that began October 1 will decrease from the month-ago forecast of 819.65 million to 818.52 million tonnes.

 

Production in China, the biggest producer and consumer after the US, will total 168 million tonnes, up from 166 million forecasted last month and up from 158 million last year, the USDA said.

 

Inventories before next year's Northern Hemisphere harvests will total 129.16 million tonnes, less than the 132.36 million predicted a month ago, and less than the 147.95 million tonnes estimated for a year earlier, the USDA said. Analysts expected 130.25 million.