October 1, 2012


Global grain prices may decline with good yield forecast


With reports of better-than-expected yields by some US farmers just weeks after new records were set, global grain prices are likely to come under continued downside pressure.


Benchmark corn futures on the Chicago Board of Trade fell 1.2% to US$7.1625 a bushel on Thursday (Sep 27) to a fresh three-month low, as a weak US export report added bearishness to the demand side of the fundamentals equation.


The USDA on Thursday reported that net export sales of corn in the week through September 20 totalled 400 tonnes, well below analyst forecasts for 125,000 to 300,000 tonnes. The dismal export figure from the world's largest corn producer and exporter follows a string of low export reports.


"We can expect further losses on the improved crop situation," said Tokyo-based Okato Shoji General Manager Kaname Gokon.


Corn prices have fallen 13.8% since August 21--when they closed at a record high as the US's worst drought in decades withered the corn crop--with the latest downtick coming as traders braced for the USDA's quarterly grain inventories report, due Friday 8:30 a.m. EDT.


Historically high prices have significantly reduced demand for corn from the animal-feed sector, ethanol makers and overseas buyers.


Okato Shoji's Gokon tipped CBOT December corn to drop to US$7 a bushel next week, while CBOT November soy may drop to US$15.70/bushel, he said. The benchmark soy contract fell US$0.0225 to US$15.7075/bushel Thursday.


La Nina, which is partly to blame for drought in several parts of the world this year, including the US, has ended, meaning a return to normal weather and better prospects for crops in 2013, a top agronomist said Wednesday (Sep 26) on the sidelines of the World Rice Conference in Bali, Indonesia.


"The weather systems have not switched to El Nino, and accordingly the US will have a better crop year for 2013, an improvement in terms of weather conditions compared with 2011 and 2012," said S. Elwynn Taylor of Iowa State University.


Various indicators suggest El Nino will likely be neutral in 2013, but dryness along the US-Canada border and high moisture in Arizona suggest at least a weak El Nino, Taylor said.


"It seems that most winter wheat plantings in the US will proceed well, though there are some weather concerns in US Northwest and the Midwest," he said.


Although corn and soy prices may be on a downward trajectory, they are still providing higher returns than rice, prompting Brazilian growers to shift acreage to the former from the latter, International Grains Council senior economist Darren Cooper said Friday (Sep 28).


Brazil's rice output is now expected to total around 7.8 million tonnes in 2012-13, 10% lower than earlier expectations and marginally lower on-year, he said on the sidelines of the World Rice Conference.


Brazil's soy output is likely to hit a record 75 million-80 million tonnes next year if the weather is favourable.

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