Fears for a heatwave could yet underpin corn prices even if US officials, in a much-anticipated report, hike estimates for domestic inventories near to the psychologically important 1bn-bushel mark.
Orthodox thinking suggests that Tuesday's US Department of Agriculture Wasde report, detailing estimates for world crop supply and demand, will usher in a period of weaker prices "heading into harvest" this autumn, Drax Wedermeyer at US Commodities said.
"It is expected to be a bearish report because of the increased acres," he said, after the USDA two weeks ago hiked its forecast for corn sowings, besides finding more stocks left over from the last harvest than had been expected.
The consensus forecast is for the USDA to lift its estimate for America's corn inventories by 175m bushels to 905m bushels at the close of current season.
For the close of 2011-12, analysts on average expect a 300m-bushel rise to 994m bushels in the stocks estimate, although many expect a higher figure.
"It's not difficult to get above 1bn bushels, and then in a sneeze you have doubled the carryout," Mike Mawdsley at broker Market 1 said.
Heat dome
However, the report is being overshadowed by a heatwave which has already hit crops in southern states, sending the proportion of crops rated "good" or "excellent" in Texas, as of Sunday, standing at 13%, down by four points over the previous week.
| Forecasts for Wasde estimates for US corn and (current estimate) End 2010-11 stocks: 905m bushels, (730m bushels) Lowest estimate: 805m bushels Highest estimate: 1.05bn bushels End 2011-12 stocks: 994m bushels, (695m bushels) Lowest estimate: 757m bushels Highest estimate: 1.18bn bushels |
"The dome develops around July 15 and spreads into the western Corn Belt on July 16," where it may last at least until July 21-22, and potentially for more than a week – in the sensitive corn pollination period.
"We haven't had a real, heavy duty heatwave in pollination for a few years, since 2005," Jerry Gidel at broker North America Risk Management Services said.
"If the [Wasde] corn stocks number comes in close to 1bn bushels, where people are expecting it, people could move onto focusing on the weather pretty quickly."
'Issues in finding physical corn'
With concerns that heavy rains have leached away some nitrogen fertilizer in areas such as Iowa and southern Illinois too, Matthew Pierce at PitGuru highlighted the spread in yield estimates, around the USDA's current estimate of 158.7 bushels per acre.
| Forecasts for Wasde estimates for US soybeans and (current estimate) End 2010-11 stocks: 198m bushels, (180m bushels) Lowest estimate: 180m bushels Highest estimate: 220m bushels End 2011-12 stocks: 169m bushels, (190m bushels) Lowest estimate: 134m bushels Highest estimate: 197m bushels |
Market 1's Mike Mawdsley added the crop forecasting signals were "about as confusing as we have ever seen in the middle of the summer", noting also the USDA's higher-than-expected corn inventory number.
"There are issues in finding physical corn, especially on the fringes, whatever the figures say," Mr Mawdsley told Agrimoney.com.
"In Indiana, they are offering $0.50-0.60 a bushel over Chicago, and might still not get corn. Our guy in Texas has supplies running out soon."
Export hit
The Wasde is expected to show the official estimate for US soybean stocks at the close of 2010-11 lifted by 18m bushels to 198m bushels, following a sluggish pace to exports.
| Forecasts for Wasde estimates for US wheat and (current estimate) End 2011-12 stocks: 702m bushels, (687m bushels) Lowest estimate: 650m bushels Highest estimate: 761m bushels 2011-12 production: 2.071bn bushels, (2.058bn bushels) Lowest estimate: 1.990bn bushels Highest estimate: 2.138bn bushels |
However, the forecast for inventories at the close of 2011-12 is expected to be cut by 21m bushels to 190m bushels, following a lower USDA estimate for sowings, attributed in part to farmers opting for corn instead.
For wheat, the production figure is likely to capture attention, with analysts expecting the data to forecast a drop in US spring wheat production to a three-year low of 551m bushels.
But total wheat production is seen coming in at 2.07bn bushels, up 13m bushels on the USDA's last figure, after harvest results showed the hard red winter wheat crop which has been less affected by dry weather than had been feared.
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