(Agrimoney) – Corn futures rebounded to positive territory, helping wheat prices recover too, after the US made a unexpected cut to its estimate for world inventories, citing increased hopes for exports, and dryness damage to South Africa’s crop.
The US Department of Agriculture, in its monthly Wasde crop report, cut its estimate for world corn stocks at the close of 2014-15 by 4.3m tonnes to 185.3m tonnes.
The downgrade surprised investors, who had expected a marginal upgrade in the estimate, to 189.7m tonnes, and their immediate market impact was to send corn futures May corn futures to $3.90 ¼ a bushel in Chicago, a 0.4% rise on the day.
Ahead of the data, the contract was trading at $3.84 a bushel, down 1.2%.
‘Higher projected demand’
The USDA said its lower estimate for world corn stocks was down in part to a 50m-bushel (1.27m-tonne) downgrade to the forecast for inventories in the US itself.
The revision reflected a 50m-bushel upgrade to 1.80bn bushels in the estimate for US corn exports this season, “based on commitments to date and higher projected global demand”.
The department also raised its forecast for domestic feed use of the grain in 2015-16, by 50m bushels to a seven-year high of 5.03bn bushels (134.63m tonnes), but cut its estimate for consumption of the grain by US ethanol plants by the same amount.
“Reported corn use for ethanol for October through January implies a higher conversion rate [of grain into ethanol] than previously assumed,” the Wasde said.
‘Periodic heat’
The USDA also lowered its estimate for world corn production in 2014-15, with cuts to figures for Belarus and South African crops more than offsetting a 500,000-tonne upgrade to 23.5m tonnes in the forecast for the Argentine harvest.
“South Africa corn output is lowered 2.0m tonnes as February dryness and periodic heat, particularly in the western and central corn-growing regions, coincided with corn pollination,” the department said.
Pollination is a particularly heat sensitive period for corn development.
The forecast for average US farmgate corn prices in 2014-15 was nudged $0.05 higher to $3.50-3.90 per bushel, adding $711m to the value of last year’s harvest.
‘Increase in seed use’
The USDA also made a surprise downgrade to the estimate for domestic wheat stocks at the end of 2014-15, albeit only by 1m bushels to 601m bushels (18.80m tonnes).
The revision reflects “an increase in expected seed use”.
The world wheat stocks figure, at 197.71m tonnes, was also a little shy of expectations, reflecting too a downgrade to 580,000 tonnes to 5.81m tonnes in the estimate for Australian inventories.
Chicago wheat futures for May, which stood down 0.6% at $4.90 a bushel ahead of the Wasde, rebounded to $4.96 ¼ a bushel, up 1.3% on the day.
