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Macquarie Agri-View
USDA slashes corn supply…again
Feature article
The USDA today released the February WASDE report. Below we analyze
the data and the impact it will have on grain prices. The main feature of the
report was the changes made to the US and global corn balance sheets,
which were both tightened far more than the market had anticipated.
USDA report snapshot – acutely tight corn fundamentals
Corn will likely trade limit up following today’s report. The USDA
projecting US corn ending stocks for 2010/11 at 675m bu, well below the
average market pre-report estimate of 729m bu, but slightly higher than
Macquarie’s pre-report forecast of 663m bu. The USDA’s estimate suggests
US corn stocks/use at 5%, a level considered bare minimum pipeline supply
at the end of the season.
The USDA increased corn for ethanol usage by 50m bu to a new record
high estimate of 4.95b bu. The USDA also increased industrial corn usage
due to very strong corn usage for high fructose corn syrup. Not surprisingly
the USDA increased its forecast average farm price level to $5.05-$5.75/bu,
from a previous range of $4.90-5.70/bu.
The USDA tightened the global corn balance sheet by nearly 3mt more
than the market expected. The USDA pegged world corn ending stocks at
122.5mt; down 15.6% y/y. The USDA’s changes suggest a stocks/use
ratio of 14.6%; the tightest level since 1973. The USDA decreased
Argentine corn production by 1.5mt to 22mt, which is likely still too optimistic
in our view. The USDA left Brazil’s corn production estimate unchanged at
51mt despite a recent Conab estimate of 54.5mt. The uncertainty that arises
over the wide divergence between the two estimates will not be adequately
answered until the market can further assess the development of Brazil’s
Safrinha corn crop, which is planted following the soybean harvest. Currently
we think the USDA estimate is much closer to the mark.
The USDA reduced South Korea’s corn import demand and consumption by
0.5mt due to the foot and mouth-induced herd reductions across the country.
The latest data suggests Korea has now culled more than 30% of its total hog
herd and 5% of its total cattle herd.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Macquarie Agri-View
USDA slashes corn supply…again
Feature article
The USDA today released the February WASDE report. Below we analyze
the data and the impact it will have on grain prices. The main feature of the
report was the changes made to the US and global corn balance sheets,
which were both tightened far more than the market had anticipated.
USDA report snapshot – acutely tight corn fundamentals
Corn will likely trade limit up following today’s report. The USDA
projecting US corn ending stocks for 2010/11 at 675m bu, well below the
average market pre-report estimate of 729m bu, but slightly higher than
Macquarie’s pre-report forecast of 663m bu. The USDA’s estimate suggests
US corn stocks/use at 5%, a level considered bare minimum pipeline supply
at the end of the season.
The USDA increased corn for ethanol usage by 50m bu to a new record
high estimate of 4.95b bu. The USDA also increased industrial corn usage
due to very strong corn usage for high fructose corn syrup. Not surprisingly
the USDA increased its forecast average farm price level to $5.05-$5.75/bu,
from a previous range of $4.90-5.70/bu.
The USDA tightened the global corn balance sheet by nearly 3mt more
than the market expected. The USDA pegged world corn ending stocks at
122.5mt; down 15.6% y/y. The USDA’s changes suggest a stocks/use
ratio of 14.6%; the tightest level since 1973. The USDA decreased
Argentine corn production by 1.5mt to 22mt, which is likely still too optimistic
in our view. The USDA left Brazil’s corn production estimate unchanged at
51mt despite a recent Conab estimate of 54.5mt. The uncertainty that arises
over the wide divergence between the two estimates will not be adequately
answered until the market can further assess the development of Brazil’s
Safrinha corn crop, which is planted following the soybean harvest. Currently
we think the USDA estimate is much closer to the mark.
The USDA reduced South Korea’s corn import demand and consumption by
0.5mt due to the foot and mouth-induced herd reductions across the country.
The latest data suggests Korea has now culled more than 30% of its total hog
herd and 5% of its total cattle herd.
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