February 10, 2012


US corn outlook up as Argentina's crop falls short


Expecting shipments to jump as Argentina's crop falls short, federal forecasters raised their outlook for US corn exports Thursday (Feb 9).


The USDA also projected US wheat exports to rise as global demand for the grain among livestock producers strengthens.


Still, the agency's monthly crop report isn't expected to roil commodity markets as it has for much of the last two years when released. Futures on the Chicago Board of Trade are expected to open near flat for corn and US$0.02-.05 a bushel higher for wheat.


The February crop report tends to provide little new information, since the South American harvest hasn't yet begun and US farmers are still weeks, if not months, away from starting to plant their next crop.


"The USDA report was about as bland as it gets," said Dan Basse, president of AgResource Company.


Corn prices for much of the winter have found support from concerns over dry weather in South America that damaged the crop there. A smaller crop there translates into increased demand for corn grown in the US, the world's largest producer of the grain. Federal forecasters raised their US export estimate, while lowering projected inventories.


The USDA now expects the US to export 1.7 billion bushels of corn, up 3% from last month's forecast. The agency reduced projected end-of-season stock piles by more than 5% to 801 million bushels. Driving the changes was a 15% reduction in projected corn output in Argentina, which will start its harvest next month. The cut was slightly deeper than expected. The agency left its outlook for the Brazilian crop unchanged at 61 million tonnes. A slight reduction was expected. Still, analysts warned the cuts by the USDA may have been conservative, and the agency may have to make further reductions.


"We will have to see what happens in the next 30 days on production, but you can argue for maybe another 1-2 million-tonne drop in production from the region," Jefferies Bache analyst Shawn McCambridge said.


As for wheat, the USDA increased its outlook for US exports by 2.6% to 975 million bushels. That led to a 2.9% cut in end-of-season inventories. Still, the agency raised its outlook for world wheat supplies.


The exports are "supported by the stronger-than-expected pace of sales and shipments, particularly for competitively priced feed-quality wheat," federal forecasters wrote in Thursday's report.


The USDA raised its forecast for global cotton supplies at the season's end in July to 60.8 million bales, 14% higher than the starting level this season due to higher production in fourth-largest grower Pakistan and lower consumption.


While federal forecasters left their estimate for US cotton production unchanged, the higher global supplies are expected to pressure prices. Cotton for March delivery on ICE Futures US was recently trading near flat at US$0.9354 a pound.


As for soy, another major crop forecast in the closely watched report, the USDA left its outlook unchanged for US supplies, while cutting expected production in Brazil and Argentina.

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