October 13, 2011


World's grain supplies to be positive next year



Global grain inventory is expected to be better next year, the US government indicated in a report that could exert more pressure on crop prices that have already fallen from their record prices.


According to Reuters, apart from an unexpectedly deep cut to its forecast of US soy stockpiles, the USDA's monthly report made surprisingly large upward revisions to global inventories of nearly every type of grain, a welcome respite for consumers after over a year of steadily thinning supplies.


A record rice crop in India, higher wheat supplies from Kazakhstan and a record corn harvest in China all contributed to an overall more upbeat assessment of world supplies, although traders warned that conditions may yet tighten.


"Global grain stocks are incredibly high relative to the previous month, that is the most bearish thing," said an analyst for Citigroup.


Corn futures fell nearly 2% in early trading at CBOT. Soy were steady, and wheat dropped more than 5% in a sharp reversal from Tuesday's (Oct 11) 8% gains.


Before markets opened, traders said corn sales to China would limit the impact of bearish USDA data.


A 182 million-tonne corn harvest in China, up 2% from its September forecast would help meet higher feed demand, the USDA said, maintaining an estimate that China would import two million tonnes of corn in the year to next September.


That figure appeared likely to fall far short, however, after news on Wednesday (Oct 12) that Sinograin, which manages China's government reserves, had bought 1.5 million tonnes of corn and more than 900,000 tonnes of soy.


US corn and soy crops were shaved by 1%, as expected by traders, but market players were surprised by a tight outlook for soy. Supplies would be thin for the fifth year in a row with ending stocks cut by 3%.


China is the world's largest importer of soy and cotton and is expected to become a major corn buyer. The US Grains Council, a trade group, said the China corn crop is smaller than USDA projects, so China will require up to 10 million tonnes of imports.


Corn futures soared by 6.6% on Tuesday CBOT, the largest percentage gain in 15 months, on talk of China seeking corn and soy and concern about US yields.


Near-perfect summer weather boosted Kazakhstan's wheat crop to 19 million tonnes, up 19% from the month-ago estimate, said USDA, and double last year's drought-cut harvest.


With the harvest in full swing, USDA forecast the US corn crop would be the fourth-largest on record, down 1% from its September estimate due to a smaller harvest area. In a survey, traders had expected the corn estimate to drop by 1%.


USDA held yields at the same rate as September at 148.1 bushels an acre, the lowest since 2005. It said soy yields would be the second-lowest since 2003.


The soy stockpile was forecast at 160 million bushels at the end of 2011/12, 12% smaller than traders expected. USDA said the stockpile at the start of the year was smaller than expected and the crop would be slightly smaller.


As expected, USDA lowered its forecast of the soy crop by 1% for the sixth-largest crop on record, down one notch, like corn, in a month. Yields are down and less acreage is being harvested.


Wheat stocks were forecast at 837 million bushels, 14% larger than traders expected. USDA said less wheat was being used in livestock feed than expected and exports were lagging.