November 22, 2005

 

US corn exports may not reach estimates

 

 

Coming off the second largest US corn crop produced and following last year's record output, export sales of US corn should be moving out of the bins at a healthy pace.

 

However, despite more than ample supplies and favourable prices, sales of US corn in the 2005-06 crop year are currently running almost 6 percent below last year's pace. Through Nov 10, corn export sales totalled 670.8 million bushes compared with 712.5 million bushels in the same period in 2004-05.

 

Although 2005-06 export sales are only 43 million bushels below last year's sales at this time, the USDA expects a 10-percent increase in export sales to 2 billion bushels in 2005-06, magnifying the difference.

 

Analysts contacted by Dow Jones Newswires were split on whether the sales goal will be reached.

 

"The lower-than-expected exports during the harvest are a problem but not a big one," said Shawn McCambridge, senior grain analyst with Prudential Financial in Chicago. At harvest time, the market experienced extremely high basis levels at the Gulf due to the hurricanes and their impact on transportation, he said.

 

Export sales should be higher in the weeks ahead as barge freight levels have declined and cash basis at the Gulf has levelled off, allowing end-users to increase their coverage needs, he said.

 

US corn sales should pick up, and by February, they could be on pace to meet the USDA's export estimate, McCambridge said.

 

McCambridge cautioned, however, that the market will be keeping a close watch on bird flu developments in Asia, which is something all analysts said is negative for corn. If it develops into a widespread problem, corn export sales would suffer as Asia accounts for half of the export programme. In addition, if demand in China decreases by a significant amount, Chinese corn could re-emerge as a competitor to US corn exports.

 

Don Roose, president of US Commodities in West Des Moines, Iowa, agrees that export sales have been disappointing to date and said, "China continues to sell corn, and that's a real problem."

 

China has been a big exporter of corn to its South-east Asian neighbours to the tune of around 500,000 tonnes in October alone, he said.

 

He added the stronger US dollar is also a negative. If things do not improve, corn would not reach that goal. Right now exports are on track to reach 1.9 billion bushels, but to get to 2 billion bushels, China has to quit selling corn and reselling feed wheat it bought earlier from Canada, the dollar needs to ease up, and bird flu concerns need to diminish, he added.

 

Dale Gustafson, senior grain analyst with Citigroup Global Markets Inc, said the export situation at the Gulf from hurricanes Rita and Katrina hurt sales of US corn, but regardless, he does not foresee export sales reaching the 2-billion-bushel level.

 

Although "exports will pick up in the coming months" as the export bottleneck situation in the Gulf continues to ease, the US is on track to fall short of its goal as there is some indications that China will be selling even more corn that previously forecast, cutting into US exports.

 

With 42 weeks left in the 2005-06 crop year, weekly corn export sales need to average 31.6 million bushels a week to achieve the USDA's goal.

 

This week, export sales are scheduled to be released on Friday, delayed a day due to the US Thanksgiving Day holiday.