Corn could hold surprises in Wasde crop report

by Agrimoney.com

Corn estimates could hold the surprises in a flagship US Department of Agriculture report due later on Thursday which is expected, for soybeans at least, to call time on the trend of ever-tightening forecasts for crop supplies.

The USDA could, in its latest monthly Wasde report, give a further squeeze to estimates for domestic corn stocks at the close of 2010-11, already forecast to drop to a 15-year low, by lifting expectations for exports, Tim Hannagan, at broker PFG Best said.

The surprise would come from growing shipments to Mexico, whose own crop suffered heavy losses to frost, and the Middle East, which has been stocking up on grains in an effort to keep food and feed prices low.

"Both regions are new and unexpected import buyers since early February," Mr Hannagan said. Overalll US corn exports have, for four weeks running, topped 1m tonnes.

Other analysts have cited the prospect of a further lift to the 4.95bn-bushel estimate for US corn used in making ethanol, helped by the rising oil prices, and weaker grain futures, which have lifted margins for manufacturers of the biofuel.

Soybean impact

At a world level too, the USDA's estimate for corn stocks at the close of the season could fall further than the 900,000 tonnes, to 121.6m tonnes, that the market is expecting, thanks to a knock-on effect of South American rains.

Forecasts for Wasde estimates for US crops, (change on existing data) Corn stocks, end 2010-11: 665m bushels, (-20m bushels) Soybean stocks, end 2010-11: 142m bushels, (+2m bushels) Wheat stocks, end 2010-11: 810m bushels, (-8m bushels) Source: Thomson Reuters poll

While helping Argentina's parched crops, they have hampered the earlier-starting soybean harvest in neighbouring Brazil – in turn limiting the opportunities for farmers to plant their follow-on, safrinha corn, which accounts for about 40% of the country's total production of the grain.

Macquarie, which has forecast the USDA making only a tiny downgrade to its world corn stocks estimate, said that its outlook was threatened by the "extreme" delay to Brazil's safrinha corn plantings.

"The final [Brazilian corn] production figure would fall well below our current estimate [of 51.2m tonnes] if the recent heavy rainfall continues," the bank said.

"Under this scenario, Brazil's corn fundamentals could tighten considerably, particularly after the strong export pace seen in 2010."

Wet soybeans

Macquarie cautioned too of overoptimism for world soybean production and stocks, expectations which have been based on better prospects for Brazil's harvest, the world's second largest after America's.

Forecasts for Wasde estimates for world crops, (change on existing) Corn stocks, end 2010-11: 121.6m tonnes, (-882,000 tonnes) Soybean stocks, end 2010-11: 59.19m tonnes, (+976,000 tonnes) Wheat stocks, end 2010-11: 177.6m tonnes, (-201,000 tonnes) Source: Thomson Reuters poll

Analysts expect the USDA in the Wasde to lift by 1.3m tones, from 68.5m tonnes, its estimate of Brazilian production, but many forecasters have estimate the harvest above 70m tonnes.

"We think the market's expectations for this report are reasonable, but warn that there are increasing risks for soybean losses if the heavy rains continue."

Michael Cordonnier, at Soybean and Corn Advisor, clocked "numerous reports from Mato Grosso of poor quality seed and lower yields as a result of the heavy rains."

He added: "Farmers are reporting that they… are forced to harvest soybeans at very high moisture, some as high as 30%.

"These soybeans must be dried immediately, which is resulting in backlogs at the grain company driers and farmers cannot continue harvesting unless drying facilities are available."

Mr Cordonnier estimates the Brazilian soybean crop at 70.5m tonnes.

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