September 13, 2011

 

US corn crop revised down again

 

 

Despite expecting demand to fall amid low supplies, federal forecasts reduce their outlook for the US corn crop consecutively for the second month, curbing near-record prices.

 

According to the Wall Street Journal, a monthly crop report released Monday (Sep 12) by USDA stated that farmers will produce 12.497 billion bushels of corn, a 3.2% reduction from last month's forecast. The harvest is still expected to be the third largest on record, but falls short of expectations in spring when farmers planted a huge crop in response to tight supplies and historically high prices.

 

Corn prices were slightly lower in recent trading on CBOT. Prices have already surged this summer on expectations hot, dry weather would cut the size of the crop. Corn for December delivery, the most actively traded contract, hit a high in late August of nearly US$7.80 a bushel. Prices have since pulled back to around US$7.30 a bushel, but remain up 18% since July.

 

Still, demand remains the bigger uncertainty. Some analysts and traders dismissed the USDA's cut in consumption as a way to prevent concerns over shortages. The department has been curbing its forecast monthly as the outlook for the autumn corn crop declines.

 

"It is easy enough to say we are going to have a reduction in consumption, but whether or not we do is a different story," said an analyst.

 

The USDA lowered its forecast for supplies to 672 million bushels as of August 31, 2012, down from last month's prediction of 714 million bushels. That's the lowest since inventories reached a record low in the 1995-96 crop year.

 

The USDA lowered its outlook for exports and corn used for ethanol by 100 million bushels each, while the outlook for corn used for animal feed fell 200 million. Some traders noted the USDA continues to report sizable export sales, including 114,300 tonnes of corn to unknown destinations Monday, and margins for ethanol production remain positive.

 

"Taking the demand down by 400 million bushels is aggressive in my opinion," said another analyst for Citigroup in Chicago.

 

The USDA in the monthly report had a brighter outlook for the soy crop. Forecasters surprised traders by raising its prediction for the upcoming crop to 3.085 billion bushels from 3.056 billion in August. The USDA also increased its outlook for domestic wheat supplies, bucking expectations for a slight cut in inventories.

 

Corn for December delivery, the most actively traded contract, recently was down US$0.025, or 0.3%, at US$7.34 a bushel at CBOT. Soy for November delivery tumbled US$0.2475, or 1.7%, to US$14.02 a bushel. Soft red winter wheat for December delivery slid US$0.15, or 2.1%, to US$7.14 3/4 a bushel.

 

For soy, the USDA raised its forecast for the soy yield to 41.8 bushels an acre from 41.4 bushels in August, while analysts were looking for a decline to 41 bushels an acre.

 

Soy ending stocks were projected at 165 million bushels, up 10 million bushels from August due to the increased outlook for production. For wheat, the USDA raised its ending stocks forecast to 761 million bushels, up from the August prediction of 671 million bushels.

 

The USDA said Monday that it expects 940 million bushels of wheat to go to US food production this year, a five-million-bushel decrease from a month ago, and exports to total 1.025 billion bushels, down from 1.1 billion bushels. The USDA raised its soy export forecast by 15 million bushels to 1.415 billion bushels.