The world is heading for record maize (corn) production and, despite a downward revision in the U.S. maize crop, the coarse grains market is looking less tight.
In the February edition of its Grain Market Report, the International Grains Council (IGC) increased its estimate for world maize production to a record 797 million tonnes, 6 million more than its previous estimate and up from 791 million the year before. It said the change reflects improved crop prospects in Argentina, Brazil and South Africa.
The U.S. Department of Agriculture’s (USDA) March World Agriculture Supply and Demand Estimates report raised the estimate of world corn production for 2009-10 by 5.86 million tonnes to 803.69 million, compared with 794.52 million tonnes in 2008-09. The upward revision in the estimate included an increase of 3.8 million tonnes for Argentina and a 2-million-tonne rise for South Africa.
"Harvested area and yield are raised for both countries as abundant soil moisture and lack of stressful heat during the past month supported crops through critical stages of development," the report said.
Behind the overall figure there was a small cut in the USDA’s figure for U.S. maize production, down to 333.5 million tonnes in 2009-10, compared with 334 million in the USDA’s previous estimates and 331.1 million in 2008-09. The reduction in the 2009-10 figure was based on updated estimates of yields for Illinois and Minnesota, and harvested area for Michigan.
Even with this reduction, the 2009-10 U.S. maize crop is still a record. And with the 2009-10 export estimate reduced to 48.2 million tonnes from 50.8 in the previous month’s report, U.S. ending stocks are projected at 45.7 million tonnes as the 2009-10 marketing year closes, compared with 43.6 estimated a month earlier and 42.5 the previous year.
The reduction in U.S. maize exports is because of increased competition from other countries. Beginning stocks are raised by 1 million tonnes, with an upward revision for 2008-09 maize production in Argentina and lower 2008-09 exports for South Africa.
In its monthly commodities report, issued before the USDA estimates were published, Rabobank cited the strength of underlying cash markets as a major supporting factor for the maize market. "The fall in prices throughout January was extremely fast and brought major end-user engagement," it said. "At the same time, the near 75¢-per-bushel decline in price also saw farmers become very reluctant sellers.
"This resulted in a decline in pipeline inventories and forced interior and export basis levels to strengthen to attract additional grower sales and is providing fundamental support for corn futures prices."
The IGC noted that U.S. dollar fluctuations have led to choppy trading in maize futures markets. It pointed out that speculative shortcovering had helped the market to rise toward the end of February. "Good crop conditions in South America weighed, raising speculation about increased export competition," it said. "Ideas that U.S. producers will increase spring plantings also added to negative sentiment." The IGC pointed out at its annual Agricultural Outlook Forum that USDA projected a 3% area increase. Rabobank noted strong demand for maize from the U.S. ethanol industry, but it did advise caution. "While the recent strength in gasoline prices has improved blending economics, which will hopefully improve ethanol off-take, any further buildup in ethanol stocks could pressure margins to the point where ethanol producers are unwilling to bid as aggressively for supply as they have in recent months," it said.
Chris Lyddon is World Grain’s European editor. He may be contacted email@example.com.