November 14, 2011


Prospects for 2012 US corn rise



US corn prospects for 2012 rose with sowings estimated at a post-World War II high.


Analysts at Informa Economics hiked to 94 million acres their forecast for US corn plantings next spring, which would represent a rise of 2.1 million acres year on year and the highest sowings of the grain since 1944.


Informa cited the signal being sent from futures markets, and in particular the gain of corn prices relative to those of soy, the major alternative spring crop for much of the US.


Indeed, the group cut by 900,000 acres to 76.1 million acres its forecast for soy seedings, albeit a figure which still represents an increase from this year, when US farmers planted 75 million acres with the oilseed.


The forecast for wheat sowings was left at 57 million acres, including nearly 40 million acres of winter-seeded crop. Growers planted 54.4 million hectares with wheat for this year's harvest.


The upgrade came amid mounting expectation that the official forecast for this year's US corn harvest, which has already been downgraded several times after an unusually hot summer set back pollination, would be cut further.


The USDA, which in its monthly Wasde crop report cut its yield estimate by a further 1.4 bushels per hectare to 146.7 bushels per hectare, has a habit of following November downgrades with further reductions in January.


"History shows that they have a tendency to do further cuts in January, but whether it is going to be by 1.5 bushels per acre or 0.75 bushels per acre is more difficult to say," Jerry Gidel at North America Risk Management Services said.


In fact, of the 11 downgrades in November Wasde reports since 1974, eight were followed by further reductions in the January report, Goldman Sachs said.


The average January reduction was of 1.3 bushels per acre. "This pattern suggests downside risk to the USDA's current yield estimate," the bank said, adding that this factor "could support prices above" its forecast, on a three-month horizon, upgraded by US$0.70 to US$6.85 a bushel.


At Benson Quinn Commodities, Jon Michalscheck questioned whether the late harvest in the eastern Corn Belt might also compromise yields, with more than half corn in Michigan and Pennsylvania waiting to the cut as of start of this month, and more than 80% of the Ohio crop.


"That should leave the door open for plenty of questions remaining as to whether the yield will need to be reduced further as we await the January report," Michalscheck said.


Indeed, Paragon Economics and Steiner Consulting questioned whether, factoring in river flooding too, whether the USDA had been too upbeat in forecasting that 83.9 million acres, 91.2% of those seeded, would be harvested.


"Harvested acres as a percentage of planted acres look high given the challenges of this crop year," the group said.

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