November 11, 2003

 

 

US Corn Crop To Rise; China Corn Exports To Fall
 

Big crops get bigger, goes an old saying in the grain trade, and analysts say the rule should hold for this year's U.S. corn crop when the U.S. government updates its already record estimate on Wednesday.

 

But the bearish price effects of the outlook for an even bigger record corn crop this year were being tempered by the outlook for even bigger usage, including corn for ethanol fuel production and rising exports as China backs off its exports.

 

The U.S. Department of Agriculture (USDA) will update its crop outlook on November 12 at 7:30 a.m. CST (1330 GMT). The average analyst estimate for the 2003 U.S. corn crop was 10.345 billion bushels, a 138-million-bushel jump from the U.S. Department of Agriculture crop prediction made in October.

 

Reports of excellent corn yields throughout fall harvest prompted U.S. analysts to pencil in a big crop, surpassing the U.S. record of 10.051 billion grown in 1994. The crop was about 90% harvested as of last week.

 

A 10.3 billion bushel crop would be 1.3 billion bushels more than produced in the drought-hit 2003 U.S. crop. However, despite the additional supplies, analysts on average said they expect corn remaining in stock at the end of the 2003/04 season in September, 2004, to fall to 1.345 billion bushels, down 8 million bushels from USDA's October forecast.

 

"My outlook is a large supply, large usage," said Dan Cekander, an analyst with Fimat Futures. "Demand prospects are pretty good in all sectors of corn."

 

Domestic usage for corn remains strong, especially on the food, seed and industrial side due to the phenomenal pace of corn-based ethanol production.

But the export picture for corn has brightened this fall due to the weak U.S. dollar. Most analysts in increasing their demand projections for U.S. corn cited that.

 

Export sales of U.S. corn were up 4.2 million tons for the first two months of the 2003/04 marketing year compared to a year ago, with purchases by top customers Japan, Taiwan, Mexico and Egypt all up from their 2002/03 pace.

 

SPECULATION ON CHINA'S EXPORT STANCE

 

"There's definite room for a sizable increase in the export number depending on what China does, and that's a wild card right now for where the corn market ultimately goes," said Randy Mittelstaedt, an analyst with R.J. O'Brien.

 

Grain markets have been awash in rumors the last two weeks that China may be shifting its aggressive corn export policy in order to preserve its sinking stocks and cap domestic prices.

 

Last month, USDA kept its 2003/04 projection for Chinese corn exports at 8.50 million tons, down six million from 2002/03. But it cut this season's China corn production four million tons to 114 million and its projected end-stocks four million tons to 21.21 million.

 

Two years ago, China corn stocks totaled 63.40 million tons. Analysts will be watching USDA's supply/demand numbers for China production and stocks for further erosion.

 

Indications that South Korea, which has shunned U.S. corn for almost three years, is back buying also fed optimism.

 

"I think we're going to buy Korean business back from China," said Charlie Sernatinger, O'Connor and Co. analyst.

 

China supplied nearly 90% of South Korea's corn imports of 6.2 million tons from January through September.