February 7, 2012


Argentina's shrinking corn crop to boost American corn export


Due to drought, decreasing production in Argentina is expected to improve American corn exports and dwindle the US supply to a 16-year low, down 6.5% or 55 million bushels from a previous government forecast just a month ago.


The USDA) on Thursday (Feb 2) will release its February supply/demand and world crop production reports and an average of analysts' estimates pegged US ending stocks of corn by August 31 at 791 million bushels, the lowest since 1996 and below the forecast in January for 846 million.


The average of analysts' estimates put the Argentine crop at 21.656 million tonnes, down from 26 million tonnes forecast by the USDA in January and well below the 29 million tonnes that Argentina was expected to produce before harsh weather started to trim crop prospects.


"I've talked to a guy in charge of 35 elevators in Argentina and he is at 18 million tonnes (corn), which is a shocking number. So I will probably be somewhere between 17-18 million," said Terry Roggensack, analyst for The Hightower Report.


Analysts also saw a 2.5% retraction of the global supply of corn to 124.9 million tonnes compared with 128.1 million forecast in January, largely due to harsh weather in Argentina, the world's second-largest exporter of corn after the US.


"We assume a four million-tonne decline in South American production and a two million-tonne decline (79 million bushels) in exports from South America," said Rich Nelson, director of research for research and advisory firm Allendale Inc.


"Allendale assumes US exports will be raised this month and for feed use to be increased in April," he said.


Most analysts said USDA has been understating the usage of corn for feed and believe the final verdict for this year's ending supply of corn will be much tighter than the government is currently forecasting.


"We're sticking to our fairly aggressive cut to US carryout (corn) and we fully expect USDA won't agree with that," said Bryce Knorr, senior editor for Farm Futures Magazine.


"The agency is likely to make only a modest reduction by increasing exports, if that. But in the long run, both exports and feed usage should be better than the government forecasts," he said.


The cash corn market has been climbing during the early stages of 2012 and producers have been reluctant sellers of corn as they bank on higher prices.


"The strong move in corn basis is more than just tightness caused by stubborn farmers hanging on to their corn. There's just less inventory out there than the government admits," Knorr said.


Following are analysts' estimates for the USDA's February supply/demand report, which will project US and global 2011/12 wheat, corn and soy ending stocks. USDA will release its US and world supply/demand report on Thursday, Feb. 9 at 8:30 a.m. EST (1330 GMT).


The 2011/12 marketing year for wheat ends on May 31, 2012. For corn and soy the 2011/12 marketing year ends on August 31, 2012.

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