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USDA sees higher record U.S. soy crop, futures fall (RT)

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WASHINGTON, Sept 12 (Reuters) – The U.S. Agriculture Department said on Monday that record U.S. soybean yields and production would be higher than previously forecast due to improved crop conditions during August, a critical development period for the oilseed.

The USDA, in issuing its latest monthly U.S. crop forecasts,also trimmed its corn production and yield projections from its August outlook. Even so, they were pegged near the high end of analysts’ forecasts and USDA reiterated its expectation for a record harvest of the yellow grain.

The increased soybean production outlook outstripped rising demand from the domestic and export sectors, and USDA raised its outlook for supplies left at the end of the 2016/17 marketing year, commonly referred to as end stocks.

For corn, 2016/17 U.S. end stocks were lowered by 25 million bushels to reflect the reduced harvest expectations but remained on track to be the biggest since the 1987/88 marketing year.

“USDA increased (soybean) crush for next year and exports for next year, but you still ended up with production outweighing the demand increases,” said Jim Gerlach, president of A/C Trading in Indiana.

Soybean futures Sv1 fell to session lows after the report was released. Corn Cv1 also hit a session low but quickly recovered its losses to hover around unchanged.

USDA left its domestic wheat end stocks view unchanged in its supply and demand report, roughly in line with market expectations.

In the monthly update, USDA forecast the 2016/17 U.S. soybean crop at 4.201 billion bushels, based on an average yield of 50.6 bushels per acre. That topped analysts’ forecasts that ranged from 4.019 billion bushels to 4.162 billion bushels for production and 48.1 bushels per acre to 50.1 bushels per acre for yield.

Corn production was seen at 15.093 billion bushels, down from the government’s August estimate of 15.153 billion bushels. USDA lowered its corn yield view by 0.7 bushels per acre to 174.4 bushels per acre.

On the supply side, the government cut its 2015/16 soybean ending stocks view to 195 million bushels from 255 million bushels. Analysts, on average, had expected 2015/16 soy ending stocks of 232 million bushels. The move reflected a 60 million-bushel increase in exports for the marketing year.

For 2016/17, USDA pegged soybean ending stocks at 365 million bushels, up from 330 million bushels in its August report, due to the increased harvest view.

The government said 2015/16 U.S. corn ending stocks would be 1.716 billion bushels, up 10 million from August due to lower exports. For 2016/17, domestic corn stocks were pegged at 2.384 billion bushels.

Soybeans up for 4th day on weather concerns, strong demand (RT)

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  • Soybeans rise, wet weather threatens to delay harvest
  • China-led strong demand underpins Chicago soybean prices
  • Corn dips as U.S. harvest kicks off, wheat ticks higher

Adds comment, detail

SINGAPORE, Sept 7 (Reuters) – Chicago soybeans rose for a fourth consecutive session on Wednesday, with prices underpinned by strong demand and concerns over excessive wet weather delaying the U.S. harvest.

Corn prices remain under pressure as farmers start gathering a record-sized U.S. crop, while wheat ticked up after closing marginally lower on Tuesday.

The most-active soybean contract on the Chicago Board of Trade Sv1 had risen 0.1 percent to $9.61 a bushel by 0306 GMT, having firmed 0.8 percent on Tuesday when it hit the highest since Aug. 30 at $9.64 a bushel.

Corn Cv1 was unchanged at $3.28-1/2 a bushel, after dropping to multi-year lows last week and wheat Wv1 gained 0.2 percent to $3.99-1/4 a bushel.

“The U.S. Midwest is likely to receive more rain this week than had previously been forecast,” said Tobin Gorey, director of agricultural strategy, Commonwealth Bank of Australia.

“While meteorologists have downplayed the impact on crops, plenty of market chatter about delays to maturation and harvesting is doing the rounds.”

Soybean prices drew support from a USDA report showing export inspections of U.S. soybeans in the latest week at 1,232,739 tonnes, above a range of trade expectations for 700,000 to 950,000 tonnes.

Gains in soybeans are being capped by the healthy condition of the U.S. crop so far this season. The U.S. Department of Agriculture rated the soybean crop as 73 percent good-to-excellent, unchanged from last week. Analysts had expected a slight decline in ratings.

The USDA rated 74 percent of the U.S. corn crop in good-to-excellent condition, in line with trade expectations and down from 75 percent the previous week.

The government has not yet issued a national figure for corn harvest progress, but state reports pegged the harvest as 1-percent complete in Illinois and 8-percent complete in Missouri.

Commodity funds were net buyers of CBOT soybean futures on Tuesday and small net sellers of corn and wheat. COMFUND/CBT

Meanwhile, Canada’s wheat stockpile shrank to its smallest mid-summer level on record, a Reuters trade survey estimated ahead of a government crop report.

Grains prices at 0306 GMT
Contract Last Change Pct chg Two-day chg MA 30 RSI
CBOT wheat 399.25 0.75 +0.19% +0.00% 424.63 31
CBOT corn 328.50 0.00 +0.00% +0.00% 333.07 47
CBOT soy 961.00 1.25 +0.13% +0.89% 979.77 37
CBOT rice 9.53 $0.01 +0.05% +1.11% $9.81 39
WTI crude 45.10 $0.27 +0.60% +1.49% $44.42 47
Currencies
Euro/dlr $1.125 $0.000 +0.01% +0.98%
USD/AUD 0.7669 -0.002 -0.22% +1.20%
Most active contracts
Wheat, corn and soy US cents/bushel. Rice: USD per hundredweight
RSI 14, exponential

Soybeans ease, corn falls for 2nd day on US crop report (RT)

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  • Soybeans, corn fall as USDA rates crops in healthy condition
  • Strong soybean demand limits price decline, wheat extends losses

SINGAPORE, Aug 23 (Reuters) – Chicago soybean futures lost ground on Tuesday, while corn slid for a second session, with renewed pressure on prices after a U.S. government report showed both crops thriving in near-perfect weather.

Wheat fell, adding to Monday’s more than 2 percent decline, as abundant global supplies continue to weigh on the market.

Chicago Board of Trade most-active corn contract Cv1 fell 0.5 percent to $3.40-3/4 a bushel by 0301 GMT, having closed down by about a similar amount in the previous session.

Soybeans Sv1 dipped 0.3 percent to $10.13 a bushel and wheat Wv1 gave up 0.7 percent to $4.32-1/4 a bushel.

“Growing conditions for beans are fantastic across the U.S. Midwest,” said one agricultural commodities analyst.

“The U.S. crop has been estimated to be a record large and it is likely to get bigger as the weather outlook for next week or two looks perfect.”

The U.S. Department of Agriculture (USDA) rated 75 percent of the U.S. corn crop in good-to-excellent condition, up from 74 percent the previous week, while soybean ratings held steady at 72 percent rated good-to-excellent. US/CROPS

Analysts had expected the USDA to report a decline in the condition of the corn crop, with soybeans seen as unchanged. At this time of last year, 69 percent of corn and 63 percent of soybeans were rated good-to-excellent.

Still, strong demand is underpinning the soybean market.

The USDA said private exporters sold 120,000 tonnes of soybeans to unknown destinations for 2016-17 delivery.

The agency also reported export inspections of U.S. soybeans in the latest week at 961,414 tonnes, above a range of trade expectations of 650,000 to 850,000 tonnes.

The European Union’s crop monitoring service significantly cut its forecast on Monday for average maize and soft wheat yields in this year’s EU harvest after adverse weather.

However, Russia is seen more than offseting the weather-related crop shortfalls in Europe.

Commodity funds were net sellers of CBOT corn and wheat futures on Monday and net buyers in soybeans and soymeal, traders said.

Trader estimates of net fund selling in corn ranged from 3,000 to 6,000 contracts, and in wheat from 3,000 to 8,000 contracts. For soybeans, trader estimates of net fund buying ranged from 3,000 to 7,000 contracts.

USDA forecast gives mixed signals to soybean market -Braun (RT)

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Karen Braun is a Reuters market analyst. Views expressed are her own.

CHICAGO, Aug 19 (Reuters) – Although last Friday’s soybean supply and demand report from the U.S. Department of Agriculture delivered a bearish feel to the market, there were quite a few bullish components lurking within.

USDA projected record U.S. soybean yields for this year’s harvest, offsetting a massive demand-based decrease in domestic old-crop carryout of 95 million bushels.

As a result, new-crop carryout for the world’s No. 2 soybean supplier rose by 40 million bushels despite demand increases for the 2016/17 marketing year. Traders still interpreted the overall news as bearish, since soybean futures contracts fell to end the week.

Traders said they expect the production forecast to cap rallies in the soybean market. (Full Story) This may be true in the short term, but it would not take much for the supply situation to tighten back up.

Based on recent trends, strong demand, and favorable weather for the current soybean crop, both supply and demand are likely to increase for U.S. soybeans in the upcoming marketing year.

But whichever one wins out will determine the direction of the soybean market, which is very sensitive to shifts in both supply and demand. So the latest figures from USDA are no cause for complacency.

DEMAND IS NOT GOING AWAY

Global soybean demand is stronger than ever and is still on the rise. Over the past couple of years, USDA has had the habit of increasing both exports and crush throughout the marketing year in response to the increasing demand (http://reut.rs/2bBIIVw).

Soybean exports and crush projections for the 2016/17 marketing year, which does not begin until Sept. 1, have increased by 3 percent and 1 percent, respectively, since the initial estimates were released in May.

Ending stocks have had the opposite trend. Although forecasts for the 2014/15 and 2015/16 carryout had at times topped 450 million bushels, both years ultimately fell far short of that at 191 million and 255 million bushels, respectively. Note that the latter figure is still subject to adjustment (http://reut.rs/2bBID4a).

Soybean use is already far outpacing long-term expectations, making the ceiling difficult to identify. Exports and crush are well ahead of USDA’s latest annual 10-year forecast, which is released each February.

U.S. soybean exports are annihilating these long-term projections. The latest estimate for the new marketing year, 1.95 billion bushels, is not even reached within USDA’s 10-year forecast period. The last season in the series, 2025/26, has 1.925 billion bushels slated in.

For the same marketing year, crush in 2015/16 is currently forecast 10 million bushels ahead of the February projection and 2016/17 crush is 30 million bushels ahead. The 1.94 billion bushels of soybeans expected to be crushed in the 2016/17 season were USDA’s target for the 2018/19 season.

With no evidence that the world’s appetite for soybeans and soybean meal is going away, U.S. exports and crush seem unlikely to fall below the current expectations and in fact are very good candidates for a continued increase.

In addition to the longer-term demand trends, short-term demand is holding its own. So far in August, daily soybean sales announcements to China and unknown destinations have been made on 11 separate days. For reference, there were only six such days in all of August 2015.

YIELD HAS CONTROL

Soybean yields are in the driver’s seat as they completely washed out the massive month-on-month drop in old-crop carryout. The market had expected an increase in both yields and carryout for 2016/17, but not to such a large degree in either one.

USDA’s soybean yield of 48.9 bushels per acre tops last year’s record (48 bushels per acre), the average pre-report analyst estimate (47.5 bushels per acre), and USDA’s initial 2016/17 trend yield (46.7 bushels per acre).

Such a high yield is not at all hard to believe. Not only are crop conditions the best since 2004, but the weather has been very supportive and will likely continue this way, at least in the near-term.

A couple of good, soaking rains are key for higher soybean yields, especially during August, the most critical month for pod setting and filling. Over the past week, ample rain showers blanketed the Midwest, including parched areas in the Eastern belt, and the forecast for next week holds moderate temperatures with scattered rainfall.

A higher realized yield at the end of the harvest is also likely based on USDA’s recent trend of underestimating final soybean yields in August. This has been the case for the past five years, showing that USDA certainly has not had a bias of being too high early on (http://reut.rs/2batdTJ).

However, the soybean balance sheet is highly sensitive to even the slightest tweaks in yield. If this year’s yield were to evenly match last year’s record of 48 bushels per acre, carryout would be slashed by 25 percent. And this makes the highly dubious assumption of no further increases to demand (http://reut.rs/2bpLelk).

Another factor on the supply side that is subject to change is planted/harvested area. In the past two seasons, final soybean area came in lower than what had been expected during late summer. This year’s soybean-friendly economics may quash that trend, but it is something that cannot be ruled out.

CLARITY COMES IN OCTOBER

Even though the 2016/17 U.S. soybean crop should be completely harvested in about three months, the associated balance sheet will not be “finalized” until October 2017. But the 2015/16 situation will become clearer in October, and this will set the tone for the new marketing year.

With the soybean marketing year ending on Aug. 31, the necessary pieces of information do not all become available until about a month afterward and are therefore not reflected until the October supply and demand report.

In early October, final trade data from the U.S. Census Bureau as well as crush data from USDA’s Fats and Oils report will be available to adjust both old-crop exports and crushing accordingly. USDA’s Sept. 30 quarterly grain stocks report will inform on the latest supply situation.

With this updated information, the market will be able to settle on 2015/16’s carryout, which has been relatively volatile to the downside over the past few months. This will set the starting point for the 2016/17 soybean balance sheet.

But with more than a year to go until the final picture of 2016/17 U.S. soybeans emerges, what we are talking about today may be something entirely different from what we are talking about a year from now.

  • Graphic- USDA carryout estimates for U.S. soybean crush and exports
  • Graphic- USDA carryout estimates for U.S. soybean ending stocks
  • Graphic- U.S. Soybean Yield, August to Final USDA Estimate
  • Graphic- U.S. soybean supply scenarios, 2016/17

U.S. corn ratings seen lower on dry conditions; soy steady (RT)

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CHICAGO, Aug 8 (Reuters) – The U.S. Department of Agriculture (USDA) will likely show decreased condition ratings for the U.S. corn crop, mostly due to seasonal factors and as some portions of the Midwestern growing region were suffering from dry conditions, a Reuters poll of 10 analysts showed on Monday.

Soybean crop ratings, on average, were expected to be unchanged while the spring wheat harvest likely advanced at a normal rate, the analysts said.

USDA in its weekly crop progress and conditions report due at 3 p.m. CDT (2000 GMT) is expected to estimate corn ratings at 75 percent good to excellent, down one percentage point from a week ago, according to analysts’ average estimates. US/CORUS/SOY

Soybean ratings were seen at 72 percent good to excellent, steady after posting a one-percentage-point rise in the previous week.

Crop conditions for corn typically decline at this time of year as the earliest-planted fields reach maturity. Condition ratings for both corn and soybeans are historically high, and it was rare for conditions to improve during some of the hottest days of the summer, the analysts said.

The spring wheat harvest was estimated at 28 percent complete, up from 10 percent last week. The harvest also was 28 percent finished during the same week in 2015. US/WHE

All figures below in percent:

Category Average Range Prior week
Corn condition * 75 74-76 76
Soybean condition * 72 70-73 72
Spring wheat harvest 28 21-37 10
* Good/excellent

Corn falls to near two-year low on USDA condition report

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  • USDA pegs condition of corn crop above forecasts
  • Soybeans hit near three-month low
  • Wheat little changed

By Colin Packham

SYDNEY, Aug 2 (Reuters) – U.S. corn fell to a near two-year low on Tuesday, slipping for a second session after the U.S. Department of Agriculture pegged the condition of the crop at above market expectations.

Soybeans fell more than 0.5 percent to hit a three-and-a-half month low, while wheat was little changed.

The most active corn futures on the Chicago Board Of Trade Cv1 fell 0.2 percent to $3.33-1/2 a bushel by 0315 GMT, having earlier hit a session low of $3.33 a bushel – the lowest since October, 2014. Corn closed down 2.5 percent in the previous session.

Analysts said corn was coming under pressure as any lingering weather related supply concerns ease.

“The proportion of U.S corn rated in good to excellent condition [has] added to the bearish tone,” said Tobin Gorey, director of agricultural strategy, Commonwealth Bank of Australia, adding that updated weather models are also favourable.

“While corn is not yet totally in the clear, the window for significant weather related losses is quickly closing.”

The USDA rated 76 percent of the corn crop as good to excellent, unchanged from the week before and ahead of analyst forecasts.

The outlook is increasing market confidence of bumper U.S. corn production.

Commodity brokerage INTL FCStone INTL.O on Monday projected U.S. 2016 corn production at 15.146 billion bushels, a record high if realized, with an average yield of 175.0 bushels per acre.

The U.S. weather outlook also continues to pressure soybeans, analysts said.

The most active soybean futures Sv1 fell 0.4 percent to $9.57-1/2 a bushel, near the session low of $9.55-1/2 a bushel – the lowest since April 19. Soybeans slumped 4.1 percent on Monday.

The USDA rated 72 percent of the U.S. soybean crop as good to excellent, up from 71 percent the previous week and above market expectations.

The most active wheat futures Wv1 was little changed at $4.05-3/4 a bushel, having closed down 0.4 percent on Monday.

U.S. corn yields still uncertain despite high July ratings

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By Mark Weinraub

CHICAGO, July 20 (Reuters) – A look at slumping corn prices would suggest that a huge U.S. harvest is a certainty, but crop data from previous bumper years shows there is a roughly 50 percent chance that come September, yields could be lower than current forecasts.

The U.S. Department of Agriculture (USDA) rated the corn crop as the second-best ever as of July 17 in its weekly report on Monday, sparking a sell-off in Chicago Board of Trade futures as the crop is now passed early development phases with little stress from adverse weather.

The biggest investment funds have already factored in a large crop according to latest figures from the Commodity Futures Trading Commission, which show they have sold off 95 percent of their net long stake in corn futures and options since mid-June.

Corn futures have now fallen 22 percent from the two-year highs hit just a month ago and closed on Tuesday at $3.48-1/2 a bushel for December delivery CZ6.

The USDA said on Monday that 76 percent of the corn crop was good to excellent as of July 17, up 1 percentage point from the start of the month and matching the second-highest mid-July ranking on record.

But strong mid-July ratings for the crop do not always correlate with final yields. Since 1993, in years with the 10 highest mid-July ratings, final yields have fallen from the government’s July estimate five times and risen five.

Market moves also have been a mixed bag in the 10 years with the best-rated crop, rising five times from mid-July to mid-September, when combines begin rolling, and falling five times. The market moves have not always correlated with the yield changes.

Adverse weather, ranging from extreme heat to heavy winds and flooding, can conspire to take the top off yield potential even late in the crop’s growth cycle.

The latest weather outlook calls for temperatures that may top 100 degrees Fahrenheit (38 C) in parts of the Corn Belt this week – just as much of the crop passes through its key pollination stage. Farmers say this could cause severe damage to yield prospects.

In central Nebraska, low soil moisture levels provide little protection to the crop from scorching temperatures, said Craig Frenzen, a farmer in that area who planted 2,000 acres of corn this year.

“We are very short of rain,” Frenzen said. “If we get the heat that we are talking about we will have very little … corn to harvest.”

But even if the government’s current projection of an average yield of 168 bushels per acre for corn is reduced, ample supplies of grain around the world provide a big cushion for the corn market, said Arlan Suderman, chief commodities economist at INTL FCStone.

Yields would have to fall below 160 bushels per acre – unlikely given current conditions – to pressure the balance sheet, Suderman added.

“The risk of that has not been eliminated but it is going significantly down,” Suderman said. “Enough of the crop is made to eliminate the need to ration supplies.”

GRAINS-Soybeans dip after rally, adverse weather forecast supports prices

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  • Soybeans ease after climbing to highest in more than a week
  • Forecasts of hot, dry weather across Midwest underpin prices

Adds comment, detail

By Naveen Thukral

SINGAPORE, July 13 (Reuters) – Chicago soybeans edged lower on Wednesday as the market took a breather after last session’s strong gains that were driven by forecasts of crop-damaging hot and dry weather across the U.S. Midwest.

Corn was little changed following a 1.5-percent rally on Tuesday, supported by a U.S. Department of Agriculture report showing tighter supplies of the feed grain.

The Chicago Board of Trade most-active soybean contract Sv1 slid 0.3 percent to $10.84 a bushel by 0220 GMT, after rallying over 3 percent in the last session. The market earlier hit its highest since July 5 at $10.97 a bushel.

Corn futures Cv1 gained 0.1 percent to $3.60-1/2 a bushel and wheat Wv1 gave up 0.1 percent to $4.38-1/4 a bushel.

“The market’s next concern is the forecast of adverse weather in the coming weeks when soybeans will in the pod-setting stage,” said Kaname Gokon at brokerage Okato Shoji in Tokyo. “Hot and dry weather will potentially reduce yields.”

Soybeans are drawing support amid worries about stressful crop conditions as forecasters said above-normal temperatures and near-normal to below-normal rainfall may spread across most of the U.S crop belt next week.

U.S. corn supplies will tighten more than expected in the coming months due to rising exports, but a bumper harvest will quickly re-stock grain bins, the USDA said on Tuesday.

The agency pegged 2015/16 U.S. corn stocks at 1.701 billion bushels, down 7 million bushels from its June estimate.

It predicted a big domestic soybean harvest would help offset rising overseas demand for U.S. supplies of the oilseed.

The USDA is likely to boost the already massive yield forecast in the coming months, according to historical data that show estimates of big crops tend to grow even larger as harvest time nears.

There is support for wheat with the outlook of lower production in France.

France’s farm ministry expects the country’s soft wheat production to shrink by almost 10 percent this year after heavy rain and limited sunshine hurt crops in the European Union’s biggest grain grower.

In its first estimate of 2016 soft wheat production on Tuesday, the ministry forecast a crop of 36.95 million tonnes, down 9.7 percent from 2015’s record volume of 40.9 million tonnes.

Commodity funds were net buyers of CBOT soybean, corn and wheat futures contracts on Tuesday. Traders’ estimates of net fund buying in soybeans ranged from 8,000 to 10,000 contracts and in corn from 3,000 to 6,000 contracts.

Wheat faces fourth week of decline, lingers near 6-year low

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  • Wheat down 10 pct in 4 weeks of decline on supply pressure
  • Corn has lost 15 pct in 2 weeks, USDA boosts planting outlook

Adds details, quotes

By Naveen Thukral

SINGAPORE, July 1 (Reuters) – U.S. wheat lost more ground on Friday with the market set for a fourth week of decline, as a U.S. Department of Agriculture (USDA) report that pegged plantings above expectations dragged on prices.

Corn, which has lost around 15 percent in two weeks of losses, is expected to decline further as excess wheat supply takes its market share in the animal feed market.

Chicago Board Of Trade most-active wheat contract Wv1 is down nearly 5 percent this week. In the previous session, prices hit a low of $4.36 a bushel, the weakest since June 2010.

Corn Cv1, which plumbed an 11-week low of $3.65-1/4 a bushel on Thursday, has given up more than 3 percent this week.

“Corn had rallied due to spillover from gains in the soybean market but the reality is that there is too much corn around and now we have increase in U.S. acreage,” said Phin Ziebel, agribusiness economist at National Australia Bank in Melbourne.

“The supply and demand situation is bearish for grains and more so for corn as feed wheat is going to eat into its market share.”

The USDA, in an acreage report, said domestic all-wheat plantings totaled 50.816 million acres, topping analysts’ forecasts for 49.869 million and the agency’s March estimate of 49.559 million.

Corn seedings were 94.148 million acres, above the high end of analysts’ estimates. On an average, they had expected acreage to fall from the government’s March forecast of 93.601 million.

The USDA, in a separate report, said corn inventories as of June 1 were the biggest since 1988 while soybean stocks for that period were the third biggest ever.

Soybean futures Sv1 are up nearly 7 percent this week, the biggest weekly gain since October 2014.

The acreage report showed farmers planted a record 83.688 million soybean acres, above the government’s March forecast of 82.236 million but below analysts’ estimates for 83.834 million.

Commodity funds were net sellers of CBOT corn contracts on Thursday and net buyers of soybean futures.

Trader estimates of fund selling in corn ranged from 15,000 to 25,000 contracts, and estimates of fund buying in soybeans ranged from 14,000 to 25,000 contracts. Estimates of fund buying in wheat ranged from zero to 5,000 contracts.

US officials cut Brazil corn crop hopes – and warn of further downgrades

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Brazil’s corn imports will soar five-fold to a 16-year high, thanks to the supply squeeze prompted by a disappointing safrinha crop, US officials said, cutting their harvest forecast and flagging “great challenges” for livestock farmers.

Brazil, better known as the second-ranked corn exporter, will see its imports swell from 330,000 tonnes last season to 1.5m tonnes in 2015-16, the US Department of Agriculture’s Brasilia bureau said, the kind of volumes more typically bought by the likes of Egypt, Israel or Turkey.

Imports at that level would be the biggest since 1999-2000, besides being ahead of the 1.1m tonnes that the USDA has officially forecast, and the 1.0m tonnes expected by Conab, Brazil’s own crop bureau.

The raised estimate reflected a weaker forecast for Brazilian corn production, which the bureau pegged at 75.0m tonnes, below the USDA’s official 77.5m-tonne figure, and the 76.2m tonnes expected by Conab.

More downgrades ahead?

The bureau said its production forecast, “down 12% from the previous year’s record crop”, reflected weaker expectations for the dryness tested safrinha, or second crop, harvest which accounts for some two-thirds of total output.

“An early start to the dry season [had] an adverse effect on the safrinha crop,” the bureau said, cautioning that further downgrades could be in the offing.

“Inconsistent weather patterns continue to challenge producers in corn growing regions in Brazil, and set expectations that the safrinha corn crop could be reduced by up to 10m tonnes from the previous year.”

While the bureau did not break out its own safrinha harvest forecast, Conab currently pegs the crop at 50.0m tonnes, a drop of 4.6m tonnes year on year.

Broker INTL FCStone earlier this month cut its forecast for the safrinha crop by 434,000 tonnes to 49.4m tonnes.

‘Struggling to maintain operations’

With the disappointing harvest coming on the heels of a strong corn export campaign, Brazil has been left with a “significantly-lower-than-anticipated supply” of the grain, driving port prices to some $250 a tonne on bureau estimates, equivalent to $6.35 per bushel.

US Gulf corn exports for spot sale were, according to broker Benson Quinn Commodities, on Wednesday priced at $0.54 a bushel above July futures, which closed at $3.92 ¾ a bushel.

Indeed, Brazilian poultry and pork producers are “struggling to maintain operations due to inflated feed prices”, which account for some 70% of output costs, the bureau said.

“Plants across Brazil responded to the increased input costs by cutting work shifts, enforcing mandatory vacation for employees, shutting down operations, and even prematurely slaughtering animals they are unable to continue feeding.”

Industry data shows a 10% drop in Brazilian chicken output over the past three months, while pig inseminations are down 15% – reductions reflected in a drop of 225,000 tonnes in the country’s monthly meat production.

Corn import origins

Meat producers’ struggle for feed has forced them to turn to neighbouring countries for supplies, although there are doubts as to how far these can stretch.

“While many producers are finding… relief from Paraguay and Argentina, neither country has sufficient corn to export large volumes to Brazil for an extended period of time.”

Imports from the US, the world’s top corn exporter, are complicated by Brazil’s policy on genetically modified crops, with 13-14 biotech varieties grown in the US not passed by the South American country, which operates a zero tolerance policy on traces of unapproved seed.

Meat imports to grow too?

Some livestock farmers are turning as an alternative to high-grade wheat for feed.

“Sources estimate that the meat industry has purchased 220,000 tons of bread-quality wheat since May 2016 for feed,” buying which means that “flour prices may also rise”.

However, Brazil may also see the squeeze play out in terms of higher imports of meat itself, as well as corn.

“US poultry and pork producers are cautiously optimistic for a boost in exports to Brazil.”