(Agrimoney) – The slow US harvest left the US with 1bn bushels less corn available as of the start of this month than a year ago, despite bigger production expectations, Rabobank said, forecasting that cash prices may not see substantial pressure until March.
The bank – in a report on the surprisingly resilient US corn and soybean prices, defying ideas that a record harvest would send values sharply lower – said that, on its calculations “the US entered into the month of November with available stocks down 18%” on a year before.
The drop in supplies reflects both an unusually tardy harvest – the slowest since 2009, reflecting delayed spring sowings and a cool summer which delayed development – transportation hiccups, and a reluctance by growers to sell at prices below cost.
“Reluctant farmer selling is the most critical factor in determining grain flow for the 2014-15 crop,” Rabobank said, blaming a “reluctance to sell below breakeven prices,” which it estimated at $4.20-4.50 a bushel for the average Midwest grower.
The US Department of Agriculture grain stocks report for December 1, which will be released in January, will show 64-68% of US corn inventories stored on-farm, above the 61% at the start of December last year, the bank forecast.
‘Driver to pressure prices’
However, the rally will start to be undermined early next year, with extra pressure potentially in July, as the financial need to price crop beckons.
“March is the normal period when cash is needed for operational expenses,” the bank said.
“We expect to see crop sales increase in March, which will be a driver to pressure cash bids lower.”
Conversely, futures prices may also face upward pressure if ideas are realised that the US cuts corn plantings next year.
“Widening new crop to old crop spreads will be key, as the value of the 2014 crop in storage varies depending on expectations for the size of new crop production,” the bank said.
Nonetheless, end users of corn requiring supplies “should weigh the risk” of a supply squeeze over winter against the “anticipation for lower spring prices”.
‘Strong demand’
For soymeal too, the bank was cautious over expecting the extent of the cash market weakness that many had anticipated a few weeks ago.
“Due to strong demand… we do not project soymeal futures and basis values to decline to significantly lower levels, as might be expected with a record [soybean] crop.”
However, some value declines should be forthcoming, as the imminent completion of the US soybean harvest tops up supplies.
“With the soybean harvest nearly complete, the earliest supply constraints will ease and product prices will begin to decline in late November/ early December.”
This is the period when “tight soybean and product supplies” begin to “ease”, Rabobank said.
