December 10, 2007

 

Analysts Expect modest decline in US corn end stocks
 

 

An expected increase in the US government's estimate of corn exports, reflecting continued strong demand for the US grain, is seen causing a modest decline in US 2007-08 corn ending stocks, analysts said.

 

The US Department of Agriculture is scheduled to release December supply/demand data Tuesday at 8:30 a.m. EST (1330 GMT).

 

The average estimate for US corn ending stocks was 1.879 billion bushels, 18 million bushels below the 1.897 billion forecast in November by the USDA, according to a survey of 16 analysts by Dow Jones Newswires.

 

Good demand for US corn from foreign buyers led the government to increase its export projection earlier this year, and demand has remained strong, with analysts expecting the USDA to increase its export forecast again, trimming ending stocks.

 

Through Nov. 29, 2007-08 US corn export sales commitments are up 36 percent compared to last year.

 

"The USDA probably should have raised its export projection in November, and since then, corn has had another strong month of export sales," said Bill Nelson, associate vice president of AG Edwards in St. Louis.

 

Corn exports are "running at a record pace, above the level needed to meet the USDA's forecast and should be increased by 100 (million) to 200 million bushels above the current 2.350-billion-bushel forecast," said Nelson.

 

The record for US corn exports is 2.400 billion bushels, reached in the 1979-80 marketing year.

 

Nelson estimates 2007-08 corn ending stocks at 1.750 billion bushels, the lowest of any analyst surveyed.

 

Not every analyst forecasts a decline in ending stocks as the high price of corn for delivery in 2008 is impacting ethanol-industry profit margins, leading to a decline in the amount of corn used for ethanol, an analyst said.

 

Although the margins in spot-month ethanol turned higher in mid-November, there is no profitability moving into 2008, said Roy Huckaby, executive vice president at Linn Group.

 

Beyond the spot market, margins for cash ethanol are negative due to the high price of corn. Margins are based on the cash price of corn and looking forward into 2008 ethanol margins are negative, said Huckaby.

 

"There is no way (for ethanol producers) to go out and hedge profitability," said Huckaby. He forecasts the amount of corn used for ethanol at 2.775 billion bushels, well below the 3.400 billion estimated by the USDA in November.

 

Huckaby pegs 2007-08 corn-ending stocks at 2.085 billion bushels, the highest of any analyst surveyed.

 

Little Change Expected In World Corn Production, Stocks

 

Few changes in world corn production or ending stocks figures are expected, with the USDA holding off making major adjustments until the January production report, analysts said.

 

Dry weather in Argentina could lead the government to trim its 2007-08 corn production estimate, but the USDA will probably wait another month to see if the weather improves, said Nelson.

 

In November, the USDA estimated Argentina's 2007-08 corn crop at 15.5 million  tonnes.

 

World 2007-08 corn ending stocks estimates are not expected to change much from the November report. "Typically the USDA doesn't make many changes in the December report," said Dan Cekander, an analyst at Fimat Futures.

 

Any changes to world corn ending stocks will be minor with stocks remaining around the 110-million--tonne level, a trader said. In November, the USDA pegged 2007-08 corn ending stocks at 110.4 million tonnes.

 

Friday, Coceral, the European Union's organization of grain traders, increased its 2007-08 estimate of EU corn production to 45.6 million  tonnes, slightly above its previous forecast of 44.8 million tonnes.