Morgan Stanley said it remained "bullish" on corn prices,
and forecast that soybean prices will "continue to outperform", as it cautioned
that even downbeat ProFarmer crop tour results could turn out to be optimistic.
The bank's agricultural commodities team, which were represented
on last week's Pro Farmer tour of major US corn and soybean producing states, said
that its findings on the trip "only confirm our bullishness on corn and,
The comments reflected in part the "unprecedented yield variability"
found on the trip "not only from field to field, but even within individual
rows of corn and soybeans", which could raised questions over whether Pro
Farmer findings had factored in enough of a downgrade from official
"Inside of individual
fields, corn ear length and girth varied dramatically — a fact the local
farmers suggested could increase harvest losses and lower realised yields below
our sample-based estimates," focused on ear counts, Morgan Stanley said.
Some brokers have already reported an early-harvest theme of
corn yields falling short of numbers farmers had expected, after undertaking ear
However, the bank also flagged the poor condition of northern
crops, which escaped much of the early dryness which afflicted Midwest farms.
"In particular, we note that results in the northern states
of South Dakota and Minnesota, generally expected to be the beneficiaries of better
weather, proved less than stellar, leaving even more risk to overall US
production," the bank said.
|Pro Farmer tour findings, change on USDA estimate and (2011 result)|
Corn yield: 120.25 bushels per acre, -3.15 bpa, (146.0 bpa)
Corn production: 10.478bn bushels, -301m bushels, (12.358bn bushels)
Abandoned acres: 89.5%, -1.1 points, (91.4%)
Soybean yield: 34.8 bushels per acre, -1.3 bpa, (41.5 bpa)
Soybean production: 2.60bn bushels, -92m bushels, (3.056bn bushels)
The deterioration of northern crops was also highlighted overnight US Department of Agriculture ratings data which showed temperatures of 100
degrees Fahrenheit last week fuelling a plunge in the health of South Dakota corn
And Morgan Stanley also questioned whether the USDA has been
realistic in assuming that 90.6% of domestic corn will make it to being harvested
for grain, rather than being cut for silage.
"Harvested acreage is still subject to debate. Our team, and
a number of other scouts, noted a higher frequency of crops already harvested
for silage than last year," the bank said.
"We maintain our corn harvested/planted ratio at 88.7%,"
below the Pro Farmer figure of 89.5%, besides the USDA forecast.
Separately, Mark Welch at Texas A&M University also
questioned the Pro Farmer assumption, saying the prospect of a higher figure of
abandoned acres was a "a real concern given further deterioration of the crop's
'Still leave us
Morgan Stanley added that soybean prices were "likely to
continue to outperform on these results, with "the magnitude of the downward
surprise in soybean yields, relative to corn, coupled with continued data suggesting
US demand is not getting rationed" continuing to support values.
For corn, "demand prospects still leave us bullish".
While Brazil had enjoyed a strong safrinha harvest, "the
glut of cheap Brazilian corn supplies will not prove sufficient to offset US exports
through the balance of 2012".
Furthermore, "weakening corn basis and declining ethanol inventories
should help support US ethanol production volumes as we move through the US harvest".