November 11, 2004

 

 

Analysts Forecast 2004 US Corn Crop at 11.676 Billion Bu

 

Continued reports of strong corn yields across the heart of the US corn belt this fall have generated ideas that Friday's production forecast in the US Department of Agriculture's November crop report will show a modest increase from October's record projection estimate.

 

Analysts surveyed expect the USDA will make an upward revision to its current yield and production estimate. The report is scheduled for release Friday at 0730 CT (1330 GMT).

 

The average of analysts' estimates anticipates an 11.676 billion-bushel corn crop with a yield of 159.2 bushels per acre. The estimates ranged from 11.573 billion to 11.750 billion bushels for production and 157.9 to 160.3 bushels per acre for yields. The USDA currently pegs the crop at 11.613 billion bushels with a yield estimate of 158.4 bushels an acre.

 

US corn harvest results have shown higher-than-expected corn yields and that is likely to provide the stimulus to raise the production forecast. However, many analysts contend that the chance of a substantial jump in production remains limited. The USDA is already using record ear populations and the highest ear weights in recent years and that does not leave much room for a big jump in output forecasts, according to analysts.

 

The surprisingly strong yields have revived assumptions that big crop forecasts get bigger. Analysts began to notch up estimates after a warm September provided excellent finishing weather for most of the corn belt as well as evidence that marginal growing areas in the southern Midwest faired much better than previously anticipated.

 

The consensus among the trade is the crop has produced fantastic yields across the belt and the potential short falls in the upper corn belt will not keep the USDA from making an upward adjustment in Friday's production estimate. The record production outlooks have subsequently pinned the Chicago Board of Trade Dec contract below the psychological $2.00 per bushel level.

 

However, the slow pace of the corn harvest is one feature that may restrict the USDA's willingness to aggressively increase its production figure. This is because the potential for minor field losses increased crops spending an extended amount of time in the fields, as weather delays as well as producers attempting to let crops dry down naturally may have taken a little off the top of the crop, said Jason Roose, analyst with US Commodities in West Des Moines, Iowa.

 

SUPPLY AND DEMAND

 

Analyst surveyed generally agreed only modest changes would be made to the government's balance sheet. Minor adjustments to reflect a higher production figure are expected.

 

Analysts generally contend that it is still relatively early for any whole sale changes in the corn balance sheet. However, Roger Knapp, analyst with STA Trading Services in Memphis, said there are a couple of areas the USDA needs to address.

 

"The USDA is very generous on its feed and residual numbers. Ethanol production continues to expand and exports are lagging behind the pace needed to achieve the USDA's forecast," said Knapp. He sees the need for a 50 million bushel reduction in feed and residual to 6.0 billion bushels, while corn use for ethanol could stand another 15 million bushel increase based on the continued expansion of the industry. Moreover, exports could be trimmed by another 100 million bushels.

 

Competition from alternative feed with increased global feed wheat supplies from Canada, the European Union and the Eastern Europe have raised doubts that the US can achieve the USDA's aggressive export projection. The high cost of ocean freight and higher Chinese production are additional factors that may limit US export demand.  However, some analysts cite current low price levels and a sluggish US dollar versus other major currencies as supportive factors to keep US exports competitive in the global market.

 

On the whole, only minor revisions are expected to corn's supply and demand tables, with analysts generally looking for ending stocks to fall within a range of 1.7 billion to 1.9 billion bushels. The USDA currently projects 2004- 05 ending stocks at 1.691 billion.

 

World supplies could see a modest boost from higher US inventories. The USDA currently projects world corn ending stocks at 100.7 million metric tons. Private crop forecasters have also begun to notch up China's production outlooks. Private estimates have reported the potential for a 5 million to 7 million ton boost to China's output above current projections. In October, the USDA estimated China's corn production at 122 million tons.