February 12, 2007
USDA: Jump in South American corn output
A jump in corn production in South America, as detailed by the US Department of Agriculture, could eventually offer some export competition for the US, but even with this extra grain, world ending stocks remain the tightest in decades, one analyst said Friday (Feb 9).
Argentine corn production rose to 21 million tonnes, up from the 19 million tonnes estimated in January, the USDA said Friday in its February world crop production and US supply and demand report. Brazilian corn output is seen up 4 million tonnes, to 46 million tonnes. Argentina is the no. 2 world exporter of corn, behind the US, and the jump in the production came as a surprise.
"We knew Argentina would be aggressive last year (in planting) corn after last year's 15.8 (million). If they had 17 to 18 million, that would have been a big surprise. We thought maybe 19 million, and here (production is estimated at) 21 million tonnes," said Joe Victor, vice president for marketing at Allendale, at a monthly press conference call sponsored by the Minneapolis Grain Exchange.
The strong corn prices--with Chicago Board of Trade March futures resting around $4 a bushel--will lure even non-traditional exporters like Brazil to perhaps consider exports. As the South American harvest comes to bear in the coming weeks it's possible that grain could enter the world marketplace.
It's needed, Victor said. "World ending stocks at 87.95 million tonnes are the lowest since 1980," he said.
One caveat to the aggressive Argentine export scenario is the current political and inflationary climate in that country. The Argentine government has tried to discourage exports of other agriculture commodities such as beef and there are questions whether this could happen with corn. Another top corn exporter, South Africa, is likely limited in its exports, especially after USDA cut its crop to 9.5 million tonnes, from 10 million, Victor said.
Looking at the US data, the USDA said ending stocks for corn were seen at 752 million bushels, slightly under the trade estimate, but the same as the January figure. The USDA made no changes to its supply/demand table.
Early calls for the CBOT market are firmer, based mostly on follow-through buying from a stronger overnight trade, Victor said. He expected corn and soybeans to start 3-5 cents a bushel higher, and wheat to open 2-3 cents up.
Even though the USDA made no changes in its supply and demand tables, Victor believes the government's forecast for corn used in ethanol production might be too high, at 2.15 billion bushels.
Judging by recent Energy Information Administration data, the statistical arm of the US Department of Energy, ethanol production for September, October and November is falling short of the pace that's needed to use up those bushels.
"For that to change, we need a rally in crude oil prices and a drop in corn prices," he said.
Soybeans
Ending stocks for soybeans were seen at 595 million bushels, above the trade estimate of 569 million, and above January figure of 575 million.
A drop in exports by 20 million bushels, to 1.1 billion bushels was responsible for the rise in ending stocks.