Tuesday, July 10, 2012

US Crops Hit By Massive Downgrade

From Agrimoney:

Corn deterioration heralds 'huge yield downgrade'

further sharp decline in the condition of US crops, which showed particular deterioration in the top corn and soybean growing state, has opened the door to a "massive yield downgrade" in a key report.

The US Department of Agriculture, in a weekly crop condition report, cut by eight points to 40% the proportion of domestic corn in "good" or "excellent" condition as of Sunday, the lowest figure since the drought year of 1988.

The proportion of soybeans rated good or excellent tumbled by five points to 40%, also a 24-year low, thanks to the hot and dry Midwest weather which has dashed hopes of bumper crops, and sent grain prices soaring.

'Massive yield downgrade'

Indeed, the run-up in soybean futures to a record high on Monday, and corn futures to within 2% of their own all-time top, came on "expectations that the USDA would reduce their US crop condition ratings after the session closed", Luke Mathews, at Commonwealth Bank of Australia, said.

"And the USDA did not disappoint. The deterioration in crop conditions paves the way for a massive yield downgrade by the USDA" when it on Wednesday releases the latest edition of its monthly Wasde crop report, key features of the agricultural commodities calendar.

"We think the USDA will cut corn yields to 150-153 bushels per acre," from a current estimate of 166 bushels per acre, Mr Mathews said.

A downgrade of that level would equate to some 1.2bn-1.4bn bushels (29m-36m) tonnes of corn production, factoring in the official forecast for harvested corn acres of 88.9m acres.

Commerzbank said: "Radical cuts in the yield and crop forecasts by the USDA tomorrow are inevitable."