June 13, 2011

US corn prices break record

US corn prices reach an all time high after the USDA's much anticipated June WASDE report was unveiled.

Revisions made in the USDA report were very supportive for corn prices due to a 1.5 million decline in US corn planted area (from 92.2 million acres to 90.7 million acres) while the harvested area was estimated at almost two million acres lower. US 2011/12 ending stocks were lowered to 695 million bushels, taking them below 2010/11's low levels while a significant upward revision of 12 million tonnes was made to China's corn demand which the USDA noted would be met by drawing down domestic stocks.

All this paints a very supportive backdrop for corn prices and corn will continue to have favoured exposure across the agricultural complex and with balances tightening further upside risks from current stable elevated levels. The USDA kept its estimate of the US corn yield unchanged from May's report at 158.7 bushels acre and this could provide the next bullish impetus to prices.

Global corn stocks to use ratios are estimated at record lows. The report was less positive for wheat and soy.

While EU wheat production was revised down after a dry spring, global production remains comfortable while estimates of US Hard Red Winter Wheat came in above market expectations.

Soy planted area in the US was unchanged while 2010/11 US ending stocks were revised higher and 2011/12 US exports were lowered and ending stocks revised higher while Southern Hemisphere production was also upwardly revised. Price action across the grains will be driven by corn over coming months where market balances are very tight. High corn prices bode well for wheat feed demand especially as there is no shortage in feed grade varieties. For soy, US plantings and harvested area could change over coming months with a longer planting window than corn.