US lowers corn outlook
By Gregory Meyer in New York
The US has confirmed that grain consumers are recoiling in the face of soaring prices, suggesting a blistering rally in food commodities may start to level off.
Livestock and poultry farmers cut feed corn consumption by 8 per cent to 4.4bn bushels in the crop year ended August 31, the US Department of Agriculture said in a monthly estimate on Wednesday. The sum was 150m bushels less than its previous estimate.
Prices of corn and soyabeans, the main components of animal feed, broke records this summer as the worst drought in half a century wilted fields. The rally has rattled agricultural commodities markets, prompting worries about a food crisis in poor nations.
On Wednesday the USDA reiterated its downbeat outlook for both crops, estimating a corn harvest of 10.73bn bushels, down 13 per cent from a year ago, and a soyabean crop of 2.63bn bushels, down 14 per cent on year.
But high prices are taking a toll. The department said domestic corn demand would fall 790m bushels from the last crop year, led by declines in the ethanol and feed industries, while exports would drop 290m bushels.
“Demand destruction is in full force,” said Chris Narayanan, head of agricultural commodities research at Société Générale.
Darrel Good, a University of Illinois economist, wrote that “the slowing pace of consumption suggests that corn prices have likely peaked” unless a pending September 28 report on grain stocks contained surprises.
Sanderson Farms, a chicken producer, recently told analysts it planned to operate at 6 per cent below capacity “until market conditions improve”.
CBOT September corn fell 1.4 per cent to $7.71 a bushel, while CBOT September wheat, which is for delivery of the already-harvested soft red winter crop, rose 0.8 per cent to $8.67 a bushel.
CBOT September soyabeans added 2.6 per cent to $17.40¾ a bushel as the USDA’s crop production forecast fell short of expectations.
“You are seeing an opposite pull on the market as you look at the impact of these reports,” said Chad Hart, agricultural economist at Iowa State University.
US farmers have been reaping corn at a record pace, with some of the 15 per cent that is harvested fed to animals already. As a result the USDA increased its estimate of demand for the new corn crop by 75m bushels.
Meanwhile, the agency also lowered its global wheat production outlook by 4.1m tonnes to 658.73m as drought and heat hurt crops in Russia and Kazakhstan.
“Black Sea countries’ exportable supplies have tightened dramatically as a result of production related shortfalls and export constraints in Ukraine,” the department’s foreign agricultural service said in a circular.
Courtesy: The Financial Times