US farmers will cut corn sowings less dramatically than some commentators believe, limiting sowings of soybeans, Washington officials said, in a report which raised expectations for the rise of China as a crop importer.
US farmers, the biggest corn growers, will plant 93.5m acres with the grain this year, the US Department of Agriculture said in a long-term forecasting document.
While down 1.9m acres year on year, it still represents a historically high figure, and is well above the 91.5m acres at which tractor giant Deere & Co on Wednesday pegged US corn seedings, and above an estimates from Morgan Stanley too.
Informa Economics, which has estimated sowings at 93.3m acres, and ethanol-to-rail group Andersons, which on Wednesday pegged plantings at 93m-94m acres, are among groups in closer agreement with USDA thinking.
However, the crop may prove a poor financial choice for farmers, with farmgate corn prices seen averaging $3.65 a bushel next season, down from $4.50 a bushel in 2013-14, as a rise in yields drives record production and allows a sharp rise in inventories above $2.6bn bushels.
For soybeans, farmgate prices will fall dramatically too, to $9.75 a bushel in 2014-15 from $12.15 a bushel this season, as a rise in sowings, although lower than many other analysts have pencilled in, allows for bumper production.
The USDA estimated plantings at 78.0m acres, which would not – quite - set the record that many analysts expect, with Deere seeing area at 80.0m acres, Informa at 81.3m acres.
Indeed, the USDA forecast that soybean sowings may have reached something of a ceiling, not exceeding 78m acres for the next decade.
"Lower US livestock production since the 2008 peak and increased availability of distillers grains and canola meal have lowered demand for soymeal as a livestock feed in recent years, thereby generally reducing the domestic soybean crush," the department said, although predicting a revival in demand ahead.
Furthermore, US soybeans exports will continue to rise, driven by "strong global demand, particularly in China", if offset by the rise of Brazil as a force in exports of the oilseed.
Indeed, China's appetite for soybean imports looks like proving even stronger than thought, hitting 107.0m tonnes in 2022-23, 4.1m tonnes more than previously expected, and reach 112.3m tonnes a year later.
"The projections assume that Chinese policies will emphasise production of grains over soybeans, allowing increases in soybean imports to fill the shortfall in domestic soybean production," the USDA said in its so-called Baseline report.
"China continues to add oilseed crushing capacity that will contribute to strong gains in soybean imports."
However, imports of corn will rise more than previously expected, hitting 20.0m tonnes in 2022-23, up 400,000 tonnes from the previous forecast, and reach 22.0m tonnes a year later.
"China's strengthening domestic demand for corn is driven by structural change and growth in its livestock sectors, as well as by rising industrial use.
"The increase in China's imports accounts for nearly half of the projected growth in world corn trade."
But the country is seen remaining a relatively small exporter of wheat, leaving the likes of Egypt, Brazil and, increasingly, sub-Saharan Africa centre stage.
"Growth in wheat imports is concentrated in those developing countries where income and population gains drive increases in demand," including also the North Africa and the Middle East region, Indonesia, and Pakistan.
The Baseline report - while not seen as a binding indication of USDA thinking short-term, and based on estimates put together late last year - is viewed by many investors as offering a decent indication into prospective sowings.
Last year, the briefing pegged US corn plantings for 2013 at 96.0m acres and soybean sowings at 76.0m acres - both figures within 0.7% of seedings as they turned out.