August 11, 2008

Favourable weather seen to prop up USDA corn production report

Analysts estimate on average that the US Department of Agriculture will project total corn production at 11.938 billion bushels, up from the government's July estimate of 11.715 billion bushels. Yields are estimated at 152.3 bushels per acre, up from 148.4 bushels per acre in the July report.

The estimates are the results of a Dow Jones Newswires survey of 22 analysts. The USDA is scheduled to release crop production and supply and demand reports Tuesday at 8:30 a.m. EDT (1230 GMT).

The report is highly anticipated as the first clear picture of the effects of June's flooding in the US Midwest on the crop. The government has conducted additional surveying prior to the report to gauge the flood's effects.

Analysts estimates for corn production range from 11.1 billion to 12.33 billion bushels. Yield estimates range from 149 bushels per acre to 155.4.

Normal rains and moderate temperatures boosted crop conditions throughout the month of July. Informa Economics, which had the highest projected yield and total production in the survey, noted in a report that Indiana, Illinois, Wisconsin, Iowa and South Dakota showed the greatest improvement.

The crop rated good to excellent in the USDA's weekly crop progress reports has steadily climbed, which analysts said is rare for this time of year.

Informa estimated harvested acreage at 78.9 million acres, 600,000 above the USDA's June estimate, due to increases in Indiana, Illinois and Iowa.

Farm Futures, which conducted its own survey of 701 producers via e-mail, said the number of acres planted and lost to flooding remains a key variable this year. Farm Futures is projecting total production of 12.061 billion bushels.

"Our surveys this year have consistently shown that farmers planted more acres than USDA found," Farm Futures Senior Editor Bryce Knorr said. "But while we raised planted acreage to 88 million, survey data indicated greater abandonment due to flooding, reducing harvested acreage by 580,000 from USDA's earlier estimates."

Dale Durchholz, an analyst for AgriViser, said a lot of people have been "hoodwinked" by the improving crop ratings. The weekly ratings are subjective, he said.

"We started out so low this year, naturally the crop is going to look much better than the week before, and the week before that," he said. "But is it really that much better than a year ago?"

Durchholz projects a yield of 150.2 bushels per acre and total production of 11.791 billion acres. He projects harvested acreage will drop by a half-million acres.

The crop remains behind schedule, and could still run into problems with less daylight and potentially an early frost, analysts said.

"The crop was planted late. You can't ignore that. It requires that you have a long, extended end of season," Durchholz said.

Increased production will translate into higher ending stocks for the 2008-09 marketing year, analysts said. Analysts on average expect new-crop ending stocks of 991 million bushels, up from the government's July estimate of 833 million bushels. The estimates from 15 analysts range from 704 million bushels to 1.235 billion bushels.

"All the demand trends are unchanged, so that translates into bigger ending stocks," said Brian Hoops, president of Midwest Market Solutions. He is projecting 2008-09 ending stocks of 1.229 billion bushels, based on a yield of 153.5 bushels per acre and total production of 12.111 billion bushels.

Durchholz, who had the lowest projected ending stocks in the survey, said that in addition to lost production, an increase in feed demand accounts for his projected ending stocks of 704 million bushels.

Analysts project 2007-08 ending stocks will be virtually unchanged at 1.599 billion bushels, up from 1.598 billion bushels in the government's July report. Estimates range from 1.483 billion to 1.648 billion bushels.

Analysts expect the USDA to increase world supplies slightly, based mostly on a projected rise in Chinese production.

US Commodities President Don Roose said he expects China's total production to increase by 2 million tonnes due to improved growing conditions.

The China National Grain and Oils Information Centre raised its output forecast this week, hiking its corn output estimate by 2 million tonnes to 156 million tonnes.

Wachovia Securities grains analyst Bill Nelson said that in addition to gains in China, Europe's crop appears to be strong and the larger US crop will also boost world supplies.

"In terms of the world supplies, the US dominates," he said.