January 6, 2012
The possibility of a poor South American corn crop boosting US exports of the grain was dispelled with warnings about the competition from feed wheat from southern hemisphere growers.
Analysts at Allendale slashed its estimate for Argentina's corn crop by 5 million tonnes to 24 million tonnes, the latest in a series of downgrades to South American crops.
Indeed, Illinois-based broker's revised estimates were below the Cropcast forecast of 24.5 million tonnes which captured investors' attention earlier.
The downgrade reflected the heat and drought which has also affected the southern Brazilian states of Parana, Santa Catarina and Rio Grande do Sul, hurting corn pollination and soy development.
"In three out of the four weeks when Argentine corn pollinates, a process determining about 50% of crop yield, "it has been doing so under significant stress", Allendale director of research Rich Nelson told Agrimoney.com.
"It is a serious situation. You cannot recover from pollination stress."
However, Allendale left unchanged its estimate for US corn exports, "despite the Argentine drought", citing the prospect for the void left by the South American country in global feed supplies being filled by wheat instead.
"Whatever Argentina loses in production, a great proportion will be taken off the export total," Nelson said.
"But we feel feed wheat will offset most of this."
Argentina's own wheat, which has proven competitive enough to outcompete European supplies in their own back yard in North Africa, looks set to pick up a large part of the unfulfilled demand for corn.
Also on Thursday, the Buenos Aires grains exchange upgraded by 400,000 tonnes, to 14.0 million tonnes, its estimate for Argentina's 2011-12 wheat harvest.
Australia, which has seen a large chunk of its crop downgraded to feed by harvest rains, also looks set to be a "key issue", using its freight advantage over US grain to tap into Asian markets.
The expectations that buyers denied Argentine supplies will turn instead to the US, where supplies are already crimped, has been a big factor in a recovery in corn prices of well over 10% from mid-December lows.
Allendale also cut by 3 million tonnes to 49 million tonnes its forecast for Argentina's soy crop, while treating as less serious the impact of drought on Brazil, where the southern states of Parana, Rio Grande do Sul and Santa Catarina are devoid of rain.
The broker cut its estimate for Brazil's corn harvest by 500,000 tonnes, while leaving its estimate for the soy harvest unchanged, noting that better prospects in central states such as Mato Grosso had offset the damage in the south.
The revisions came as the broker unveiled crop forecasts ahead of a key report next Thursday (Jan 12), when the USDA reveals the latest in its Wasde series of crop supply and demand briefings. For a detailed analysis of USDA's previous Wasde report, go to eFeedLink.
While Allendale did forecast a trim to the important figure for US corn stocks at the close of 2011-12, this reflected a reduced estimate for the yield of last year's crop.
Rival broker FC Stone is expected to reveal its own pre-Wasde estimates later on Thursday (Jan 5), with Informa Economics releasing figures on Friday (Jan 6).
In Brazil itself, Parana, the top corn producing state, cut by 1 million tonnes to 6.4 million tonnes its estimate for 2011-12 output.
For soy, in which Parana ranks second in Brazil behind Mato Grosso, the state cuts its harvest forecast by 1.4 million tonnes to 12.73 million tonnes.
"The situation is critical" in Parana, said Soybean and Corn Advisor's Michael Cordonnier, who earlier this downgraded some of his South American crop forecasts.
"Agronomists are estimating that losses for the full-season corn crop in the western part of the state could be as high as 40%."
Officials in Rio Grande do Sul trimmed their estimate for state soy production by some 40,000 tonnes to 9.8 million tonnes, but hacked their forecast for corn output by one-quarter to 3.96 million tonnes.
