Reuters / A sharp decline in prospects for the European Union’s maize crop is set to further tighten supplies in a market where prices have already hit record highs this year, the International Grains Council forecast Sept. 28.
The IGC, in a monthly report, cut its forecast for global maize production in 2012-13 by 5.1 million tonnes to 833 million, largely reflecting a cut of 4.9 million in its forecast for the EU-27 crop to 55.0 million.
The EU’s crop monitoring unit earlier this week cut its outlook for maize yields in this year’s EU harvest due to hot, dry conditions in the south and southeast of the bloc.
Global maize production is now seen five per cent below last season and stocks are expected to decline to a six-year low by the end of the season, the IGC said.
“Large Southern Hemisphere harvests should add to supplies in the second part of 2012-13, but favourable weather conditions are essential,” the IGC said in a monthly report.
The IGC maintained its forecast for the maize crop in the U.S. at 275 million tonnes, although it remained sharply below the prior season’s 313.9 million following the worst drought in The country in more than 50 years.
The U.S. Department of Agriculture also reported Sept. 28 that U.S. corn stockpiles had dropped more than the grain trade expected, triggering a sharp rise in prices.
Corn, wheat and soybean supplies are forecast to tighten during this marketing year, due to crop damage from the worst U.S. drought in half a century, the USDA said.
That is expected to keep commodity prices at record levels and buoy prices at the grocery store. It’s the third year in a row for the USDA’s September inventory report to surprise traders.
Many analysts were bracing for a swing to the upside because they forecast an early harvest could swell corn supplies, but USDA’s corn figure was 11 per cent smaller than expected.
The report showed corn prices that soared to $8 per bushel earlier this year failed to ration corn demand for export, livestock feed, ethanol production and food processors.
USDA’s survey of farmers and warehouses showed 988 million bushels of corn on hand on Sept 1, the start of the corn marketing year and the traditional low point for supplies.
Wheat stocks of 2.1 billion bushels were seven per cent smaller than traders expected.
“A sub-1 billion number is enough to get the market nervous,” said Sterling Smith, futures specialist for Citigroup in Chicago, referring to corn.
Smith said the surge in corn prices pulled up wheat and soybeans prices too. The corn stockpile was smaller than expected despite a downturn in corn consumption. USDA said corn “disappearance” for June-August was 15 per cent smaller than the same period a year earlier.
The IGC says global maize consumption in 2012-13 was cut by four million tonnes to 849 million, now well below the prior season’s record 872 million.
“Demand is likely to fall given tight supplies and high prices, with both feed and industrial use expected to decline,” the IGC said.
Global wheat production in 2012-13 was seen at 657.0 million tonnes, down 4.5 million from its previous estimate, as the outlook for crops in EU-27, Australia and Russia were cut.
Russia’s wheat crop, which has been hurt by a widespread drought, was put at 39 million tonnes, down two million from last month’s forecast and well below last year’s 56.2 million.
The sharp decline in production has raised the possibility that Russia may impose export restrictions.
“Wheat prices have outperformed due to concerns over Black Sea exports and dry conditions in Australia,” the IGC said.
The IGC, in its first comprehensive supply and demand projections for soybeans, saw production rising by eight per cent to 256 million tonnes but still remaining below consumption, which was projected at 257 million.
“The forecast for an eight per cent recovery in soybean output in 2012-13 hinges on a sharp recovery to record levels in South America for which favourable weather conditions will be critical, and even at this level of output, stock levels are still to fall year-on-year,” the IGC said.