USDA Cuts New-Crop Corn Carryover Less Than Expected

June 13, 2013 01:17 AM

What Traders are Talking About:

Overnight highlights: As of 6:15 a.m. CT, corn and wheat futures are narrowly mixed, while soybeans are 5 to 10 cents lower. Weekly export sales data will have an impact on the open this morning. Cattle futures are called to open steady to firmer this morning, while hog futures are seen opening mixed.


* USDA cuts new-crop corn carryover less than expected. USDA cut its 2013-14 corn ending stocks projection by 55 million bu. from last month, but that was 191 million bu. less than traders expected. USDA made no changes to its planted or harvested acreage projections, but did lop another 1.5 bu. per acre off its national average yield forecast. USDA's yield projection at 156 bu. per acre is now 7.6 bu. below trendline. To get carryover down to the average pre-report guess, USDA would have had to cut its yield forecast by 2.75 bu. from last month without any changes to harvested acreage. Focus now turns to USDA's Acreage Report at the end of the month, which will be based on farmer surveys conducted the first two weeks of this month. Unfortunately, not all planting decisions have been finalized, meaning we won't get a final answer from USDA on planted acreage at that time. Most likely, USDA will have to resurvey some areas at a later date.

The long and short of it: USDA's report data was price-negative compared to pre-report expectations. But with private planted (and harvested) acreage forecasts on the decline and uncertain yield prospects, I don't see a whole lot of near-term downside price risk in December corn futures. Unless traders get overly concerned with crop prospects, however, I don't see much near-term upside potential either.

* Global carryovers down, but... USDA lowered its 2013-14 global carryover projections for corn, soybeans and wheat on Wednesday. But all three are still forecast above the current marketing year -- sharply higher for corn and soybeans. The projected rise in global supplies during 2013-14 is a key reason traders have been generally slow to respond to the slow start to the growing season for corn and soybeans and the HRW struggles in the Plains. Bigger global supplies are acting as a wet blanket over prices.

The long and short of it: With global supplies expected to rise (sharply in the case of corn and soybeans), traders have some "cushion" to work with. That could change if there are serious U.S. crop problems this summer, but for now, there isn't currently as much urgency to sharply push prices higher.

* China stockpiles more corn than expected. China's state stockpiling program that was extended an extra month through the end of May procured a heavier-than-anticipated 30.8 MMT of corn for state reserves, according to China National Grain and Oils Information Center (CNGOIC). That has tightened supplies and pushed domestic prices 15% above U.S. prices. As a result, Chinese corn imports are expected to rise in 2013-14. CNGOIC forecasts 2013-14 corn imports at 5 MMT, while USDA projects them at 7 MMT -- both unchanged from previous forecasts.

The long and short of it: Chinese corn imports will be up sharply from 2012-13, but their level of buying will largely be determined by price.


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