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IGC cites sowing delays as it cuts US corn hopes

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The International Grains Council broke ranks with other commentators by factoring in yield loss to the US corn crop from sowing delays, as it ditched expectations of a rise in the country's harvest this year.

The intergovernmental group cut by 10m tonnes, to 350.0m tonnes (13.8bn bushels), its forecast for this year's US corn harvest, the world's biggest.

The downgrade, which took the production forecast below last year's record 353.7m-tonne crop, reflected in part a reduced area estimate, with US farmers seen switching more land to soybeans than had been thought.

The IGC's previous estimate forecast a 2% slide in plantings - half that forecast days later, on March 31, by a key US Department of Agriculture sowings report, which pegged domestic corn seedings at 91.6m acres, well below market forecasts.

'Delays to planting'

The council on Friday highlighted "likelihood of more acreage switching to soybeans", the main rival to corn in US growers' spring sowing plans.

However, the IGC also cited "delays to planting" in its downgraded estimate, a reference to the slow start to US corn sowing in many states, thanks to a late start to spring after a harsh winter, which left soil temperatures unusually cold in some areas, with heavy rains interrupting fieldwork on many farmers too.

US farmers had, as of Sunday, completed 6% of sowings, compared with the average of 14% by then, US Department of Agriculture data late on Monday showed.

'Most of the worries are premature'

Many commentators have remained sanguine this week over US harvest prospects despite the sowing delays.

At Chicago broker RJ O'Brien, Richard Feltes said that "importantly, the 2014 US corn planting season, while starting out slow, is not on track to replicate the pronounced delays of 2013".

In New York, Citigroup's Sterling Smith said that "the heart of the planting window is not even open yet and most of the worries are premature", adding that "we should see many pockets of aggressive field work before the rains arrive later this weekend".

In Australia, trading house Pentag Nidera said that "given the excellent moisture the crop will be going into, and the fact that the optimal US corn planting window is still well and truly open, it's not hard to imagine a scenario where crop scouts could soon be talking of above trend line yield prospects.

"We've already heard a number of analysts suggesting a good growing season may have potential to deliver national average yields well in excess of 170 bushels an acre – an eventuality that would solve the US and global corn balance sheet issues in one fell swoop."

Nonetheless, investors have injected fresh premium into corn futures, driving them up more than 3% in Chicago since Monday's data back above $5.00 a bushel.

World harvest downgrade

The IGC's downgrade to its US corn estimate was behind an 11m-tonne cut to 950m tonnes in its forecast for world production of the grain in 2014-15.

That would represent a 15m-tonne retreat from the record result expected in 2013-14, which still has some time to run in South America.

"Global production is expected to decrease by 2% year on year as yields retreat from the previous year's exceptional results," the council said.

"But stocks are likely to rise" despite the lower harvest, seen growing by 5m tonnes to 163m tonnes next season, if a far smaller rise than the 13m-tonne increase the IGC forecast last month.

'Persistent concerns'

The IGC also lowered its forecast for the world wheat harvest in 2014-15, by 3m tonnes to 697m tonnes, although this would represent a historically strong harvest.

"While there are some persistent concerns over less than ideal crop conditions, especially for winter wheat in the US, overall availabilities and 2014-15 wheat crop prospects remain generally good."

A crop at this level would, nonetheless, represent a 12m-tonne decline year on year, and fail narrowly to match demand, prompting a 3m-tonne decline to 187m tonnes in year-end inventories.


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