America's corn supplies are to prove even tighter than in the run up to the price spike two years ago, after official statisticians stunned markets with lowball sowings and stocks estimates.
Rabobank, revising up forecasts for prices of both corn and wheat, estimated US corn inventories would fall by more than 13% to 1.23bn bushels the 2010-11 crop year, following last week's surprise US Department of Agriculture figures.
The USDA cut its forecast for American corn sowings, adding that stocks left over from the last harvest were weaker than analysts had expected.
On Rabobank estimates, the fall in corn stocks will leaves them at 9.1% of consumption - the lowest ratio for 15 years, and indeed below the 11% figure in four years ago which helped propel farm commodity prices higher.
The stocks-to-use ratio is a key measure of market tightness, which in turn has a large impact on the prices buyers need to pay to secure supplies.
'Extremely volatile period'
Even corn stocks at this level assume that American corn farmers achieve an average yield of 164.5 bushels per acre, the second highest on record.
|
Rabobank US corn market maths, 2010-11 (year-on-year change)
Yield: 164.5 bushels per acre (-0.1%)
Production: 13.31bn bushels (+1.5%)
Exports: 2.05bn bushels (+5.1%)
Domestic consumption: 11.46bn bushels (+0.4%)
End stocks: 1.23bn bushels (-13.5%)
Stocks-to-use ratio: 9.1% (-1.5 points) |
"If final yields fall short of our current estimate, or demand exceeds expectations, prices will need to rally" to encourage growers to plant more corn next year, and ease the market squeeze, Rabobank said.
Corn prices faced an "extremely volatile period… until the new crop supply is known".
The bank lifted its forecast for prices in the July-to-September quarter by $0.15 a bushel to $3.85 a bushel.
"Based off the USDA updates, Rabobank expects that the summer lows [in corn prices] have now been reached," the bank said in a report.
"The increased reliance on a favourable new crop yield will see a substantial risk premium being built into prices over the remainder of the growing season."
Wheat prospects
The bank also edged higher, by $0.10 a bushel to $4.85 a bushel, its forecast for wheat prices in the newly-started quarter.
|
Selected US corn stocks-to-use ratios (calculated from USDA data)
2008-09: 13.9%
2007-08: 12.8%
2006-07: 11.6%
2004-05: 19.8% (recent high)
1995-96: 5.0%
Note: exports included within use, as per Rabobank methodology |
The revision reflected in the main the prospects of firmer corn prices. The two grains can be substituted to some extent for many purposes, such as in livestock feed.
Nonetheless, Rabobank also noted a "more balanced" outlook for wheat supplies, after challenges of a wet spring in Canada, dry weather in northern Europe, and higher rates of winterkill in Russia and Ukraine.
Price progress would depend largely on any further weather setbacks.
"Adverse weather during northern hemisphere wheat harvest or corn development will likely trigger a bullish rally."
PRINTABLE VERSION
EMAIL TO A FRIEND
RSS FEEDS
