USDA May Cut Corn, Soy, Wheat Inventory Estimates, Survey Shows

By Jeff Wilson

June 8 (Bloomberg) -- U.S. corn and wheat inventories before the 2010 harvests will be smaller than the government estimated in May as wet weather cut planted acreage and trimmed yields, analysts said. Soybean supplies on Aug. 31 may fall to the smallest in five years on record export demand.

The U.S. Department of Agriculture this week likely will cut its estimate of corn reserves on Aug. 31, 2010, to 1.052 billion bushels, down 8.1 percent from a May forecast and the lowest in five years, according to the average estimate of 18 analysts in a Bloomberg News survey. The analysts said 1.608 billion bushels would be on hand before this year’s harvest.

“A markedly below-average planting pace since early May has increasingly suggested bullish supply risks around both acreage and yield,” Lewis Hagedorn, a commodity strategist for JPMorgan Chase and Co. in Chicago, said in a June 4 report.

“We continue to foresee marginal additional upside for U.S. corn exports” because of smaller South American crops and improved Asian livestock feed demand, said Hagedorn, who predicts inventories on Aug. 31, 2010, at 892 million bushels, a 13-year low.

Corn futures for July delivery fell 4.5 cents, or 1 percent, to $4.44 a bushel on June 5 on the Chicago Board of Trade. The most-active contract surged 8.1 percent in May on speculation that planting delays will reduce the size of the U.S. crop.

The department is scheduled to release its monthly supply and demand updates for corn, soybeans, wheat and cotton on June 10 at 8:30 a.m. in Washington.

Planting Progress

About 93 percent of the corn crop was planted as of May 31, the USDA said last week. That compares with the previous five- year average of 97 percent.

Corn supplies on hand before this year’s harvest may be bigger than the government estimated in May because demand for the grain for use in livestock feed slowed as producers reduced herds after losses, Hagedorn said. The analysts said inventories would be 1.608 billion bushels, up from 1.6 billion forecast by the USDA in May.

Soybean supplies on Aug. 31 may total 113 million bushels, the analysts said, down from 130 million estimated by the USDA in May and down from 205 million a year earlier. Reserves would be the lowest since 2004 and represent a record-low percentage of expected annual use, said Rich Feltes, the director of commodity research for MF Global Ltd. in Chicago.

‘Upside’ Rallies Predicted

“Job No. 1 is to ration old-crop beans,” Feltes said in a note to clients on June 5. Rallies “are not over on the upside,” Feltes said.

Soybean supplies before the 2010 harvest are likely to total 221 million bushels, down from 230 million forecast last month by the USDA, according to the analysts.

U.S. wheat production in the year starting June 1 may be smaller than the government forecast last month as rains damaged winter crops in the southern Midwest and in the Mississippi River Delta region and hampered planting of spring wheat across the northern Great Plains, the analysts said.

The average estimate of 13 analysts surveyed is for a crop of 2.02 billion bushels, compared with 2.026 billion forecast by the USDA in May. A crop of that size would be 19 percent smaller than the estimated 2.5 billion bushels produced in the recent season and the smallest in three years.

The USDA’s forecast on June 10 will be the second this year based on a field survey. The U.S. is the biggest exporter of wheat and the third-largest producer behind China and India. The winter-wheat crop accounted for 75 percent of last year’s total harvest.

Wheat reserves on May 31, 2010, will fall to 611 million bushels, according to the analysts. That would be down 4.1 percent from 637 million forecast by the USDA in May, reflecting a smaller harvest. The USDA last month said inventories at the end of May this year would total 669 million bushels.

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U.S. Reserve Inventories in Millions of Bushels

2009 2008

CORN SOYBEAN WHEAT CORN SOYBEAN WHEAT USDA May Estimate 1,600 130 669 1,145 230 637 ================================================================

ADM Investor Srvs 1,625 110 666 975 120 635 Alaron Trading 1,560 110 655 1,080 205 590 Allendale 1,610 99 662 1,015 243 605 Brock Associates 1,640 133 676 1,340 337 777 Brugler Marketing 1,590 120 692 750 280 549 Cadent Financial 1,560 112 665 1,036 212 622 Citigroup 1,500 110 684 1,093 200 655 Country Hedging 1,615 102 671 954 225 572 Kropf & Love 1,600 120 669 1,067 220 617 Fortis Clearing 1,600 115 669 1,145 200 647 JPMorgan Chase 1,633 106 669 892 208 535 Linn Group 1,675 116 676 731 156 532 Midwest Market 1,550 110 690 1,100 230 630 Newedge 1,650 110 671 1,120 170 598 N.American Risk Mgt 1,600 130 669 1,145 210 615 Northstar Commodity 1,625 105 669 1,045 205 620 Prudential Bache 1,600 115 669 990 180 600 Risk Management 1,704 117 674 1,458 376 602

Average 1,608 113 672 1,052 221 611

2009 U.S. Wheat Production in Millions of Bushels

Total All Winter Hard Soft White

USDA 2008 2,500 1,868 1,035 614 219 USDA May 2009 Forecast 2,026 1,502 871 422 208

Alaron Trading Corp. n/a 1,490 855 418 207 Allendale 1,993 1,492 864 417 211 Brugler Marketing 1,990 1,525 890 420 215 Cadent Financial, EFG Gr 2,000 1,495 864 422 205 Citigroup 2,055 1,531 891 421 219 Country Hedging Inc. 2,058 1,520 890 420 210 Kropf & Love 2,006 1,482 851 422 208 Fortis Clearing 2,035 1,490 890 415 185 Newedge 2,043 1,491 860 422 209 N.American Risk Mgt 2,004 1,480 865 410 205 Northstar Commodities 2,005 1,515 870 430 215 Prudential Securities 1,999 1,499 860 431 209 R.J. O’Brien 2,048 1,507 885 402 202

Average 2,020 1,502 873 419 208

To contact the reporter on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net