WASHINGTON, DC (Reuters) — Global inventories of corn, wheat and soybeans will be much larger than expected at the end of 2012-13, with much of the increase driven by bigger U.S. supplies and lower Chinese feed demand, the U.S. government said on Wednesday.
The U.S. Department of Agriculture raised sharply its estimates of global ending stocks of the three crops compared with March. Projected corn carryout was up seven percent, soybeans up four percent and wheat up two percent. All were larger than analysts had projected.
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“World production is going to help plug our gap in tightness in the old-crop. That is the theme of this report,” said Don Roose, analyst with U.S. Commodities.
Corn futures prices at the CBOT briefly jumped after the USDA did not raise projected U.S. inventories as much as feared, but gains subsided as traders focused on the bearish world balance sheets. By the close, wheat futures tumbled close to two percent but soybeans were only slightly lower with the May contract down only 0.2 percent. Canola rose 0.61 percent and May corn was up about 0.75 percent
The USDA said less corn and wheat was being used as livestock feed in China and the United States, the world’s top two corn growers.
China’s hog production has slowed and there are worries that avian flu will force large culling of poultry flocks.
China’s combined ending stocks of wheat and corn for 2012-13 were pegged at 122 million tonnes, up five percent from the USDA’s estimate from a month ago. China’s wheat and corn stocks were each up by three million tonnes.
Those larger stocks in China accounted for most of the four-million-tonne rise in world wheat stocks.
The United States and China also drove the sharp increase in projected world corn inventories from a month ago. End stocks in each country were up by three million tonnes out of a global rise of 7.8 million tonnes.
The department did not change its forecasts for soybean crops in Brazil, the No 1 world grower, or No. 3 Argentina, but looked for larger soybean crops in neighbouring Paraguay and Uruguay. That contributed to a two million-tonne increase in world ending stocks.
USDA boosted its forecasts of U.S. corn and wheat carryout for 2012-13 following a recent survey of growers and warehouses that found larger-than-expected supplies on hand as of March 1. That report had caused corn prices, in particular, to tumble.
USDA forecast domestic corn carryout at 757 million bu., far larger than the 632 million bu. estimated last month. It was below the average of 812 million expected by traders but within the range of forecasts.
Projected feed use was down while corn earmarked to produce ethanol was up from a month ago.
“There is still a lot of debate about how much corn is out there and that will continue,” said Harry Bormann, grain team leader, MaxYield Co-op.
USDA raised its forecast of U.S. corn used for ethanol for the first time since July 2012, to 4.55 billion bu for the marketing year that ends on Aug 31.
Ethanol production has been running far below the U.S. target for biofuel use due to lackluster fuel demand, record-high corn prices and saturation of the gasoline market at the usual blend rate of 10 percent ethanol per gallon.
Projected U.S. soybean end stocks were steady from March at 125 million bu., but below analysts’ estimate of 136 million bushels. U.S. wheat ending stocks were forecast at 731 million bu., fractionally above trade expectations.
Overall, U.S. grain and soybean supplies remain razor thin after the severe 2012 drought, but projected year stocks have been on the increase in recent months due to slower than expected demand.
Analysts said the futures market’s attention is shifting away from what are likely to be relatively small adjustments to 2012-13 balance sheets from this point.
“I think we are going to move from this idea of monitoring old-crop to paying more attention to new-crop in the coming weeks,” Rich Nelson, research director for Allendale Inc.
USDA in March forecast the biggest U.S. corn planting campaign since 1936 and very large soybean acres as well, setting the stage for massive crops if weather conditions are normal. The department will make its first estimate of the U.S. winter wheat crop in May.