Macquarie cut its estimate for the US corn yield for the
second time in a week, with Rabobank downgrading its forecast too, thanks to the dry weather which is overshadowing the
release of data normally one of the highlights of crop investors' year.
Macquarie, which last Friday downgraded its forecast to
156.5 bushels per acre, cut the figure further to 154 bushels an acre, citing "the
poor weather conditions across the southern Corn Belt".
Rabobank also reduced its forecast to 154 bushels per acre, down 3 bushels per acre from its last estimate, confirmed last week, and the US Department of Agriculture figure of 166 bushels per acre.
The revision is the latest in a series of downgrades blamed
on hot and dry US conditions deemed a threat to corns' sensitive pollination
period, fears which sent Chicago's best-traded December corn contract up a further
1.6% on Thursday to $6.43 a bushel – taking gains this week above 16%.
Indeed, the weather scare threatens to turn into a sideshow -
for corn at least - the USDA crop plantings and stocks
reports on Friday which investors have been anticipating since the initial
sowings briefing in March.
Yield vs area
Investors expect Friday's data to show a small increase, of
230,000 acres, to 96.1m acres in US corn sowings, compared with the March
However, even a bigger revision, of perhaps 1m acres, may
not be enough to drag investors from their focus on the US weather outlook,
Morgan Stanley said, terming yield hopes "a bigger driver".
|Expectations for US acreage data, change on last and (on 2011)|
Corn: 96.09m acres, +226,000 acres, (+4.169m acres)
Soybeans: 75.508m acres, +1.606m acres, (+532,000 acres)
Wheat: 56.679m acres, +779,000 acres, (+2.279m acres)
Sources: USDA Thomson Reuters
"We expect that the market will continue to focus more on
weather and the national corn yield in coming weeks, than on a circa 1m-acre
swing in corn planted area," Morgan Stanley analyst Hussein Allidina said.
"Even 97m planted acres, 1.1m acres higher than the USDA's current
estimate, would leave the 2012-13 stocks-to-use ratio below 10% if yields do
not top 159 bushels an acre — a growing possibility."
The stocks-to-use ratio is a much-watched metric in
commodity markets, measuring the availability of raw material and therefore the
pressure on buyers to pay up to secure supplies.
Where the acreage data may have more impact is on the prices
of soybeans, for which their vulnerable development period still some weeks
away, meaning the yield threat does not yet loom so large.
While the market has been factoring in sowings of 75.6m
acres, 1.7m acres above the USDA's initial forecast, it was "doubtful" this level
would be reached, given the setback that dryness has posed to seedings of so-called
double-crop soybeans, planted on land cleared by the winter wheat harvest, Mr Allidina
Macquarie said that even though an early winter wheat
harvest and high soybean prices had given growers "both the ability and
incentive to plant a record-large double-crop soybean area, we don't see it
"Dry conditions are restricting the farmer's ability to
plant," the bank said, estimating double-crop soybean area at 5.2m acres, a
rise of 8.9% year on year but well below the record of 7.1m acres set four
Wherever the data do come out, there must be some question
over their validity, given the continuing harsh weather, Societe Generale said.
"The survey period occurred during the first two weeks of
the month. Since that time, conditions have worsened even further, and estimates
may still overstate actual acreage in Friday's report," SocGen analyst
Christopher Narayanan said.
|Forecasts for US crop stocks June 1, change on March and (on yr before)|
Corn: 3.174bn bushels, -2.835bn bushels, (-496,000 bushels)
Soybeans: 635m bushels, -775m bushels, (+16m bushels)
Wheat: 723m bushels, -478m bushels, (-139m bushels)
Sources: USDA Thomson Reuters
Still, the unexpected knock-on effects of the drought mean
that even the idea of disappointing double-crop soybean acreage may have an
offsetting factor, with some growers whose corn crop has been lost seeing the
oilseed as an alternative for late sowing.
Mike Mawdsley at broker Market 1 said: "I have heard of
disking corn and planting soybeans in south west Indiana," a state where corn
crops are in particularly bad shape.
At FCStone, commodity risk manager Jaime Nolan Miralles
highlighted "growing reports of producers in the eastern Corn Belt abandoning corn
for crop insurance with intentions of planting to soybeans".