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Informa Cuts US Corn, Soybean Outlooks
Informa Economics made another cut to its outlook for the U.S. corn and soy harvests due to poor weather, according to traders.
The closely-watched crop forecaster lowered its estimate for the corn harvest to 12.711 billion bushels from 13.353 billion bushels forecast in August and 13.759 billion bushels projected in July, traders said. The firm cut its yield estimate for the crop to 151 bushels an acre from 158 bushels an acre in August and 162.5 bushels an acre in July, they said.
The forecasts remai higher than recent estimates from other forecasters. Brokerage firm Allendale on Tuesday pegged the corn harvest at 12.466 billion bushels, with an average yield of 147.7 bushels an acre, while INTL FCStone last week projected farmers will harvest 12.35 billion bushels of corn, with an average yield of 146.3 bushels an acre.
Grain traders are paying close attention to private estimates due to uncertainty about the impact of hot, dry weather on the corn crop. Farmers need to harvest a large crop to prevent low inventories from becoming significantly tighter.
"Informa's corn yield at 151 wasn't down the tubes like everybody else," said Sid Love, analyst for Kropf & Love Consulting, an agricultural advisory firm in Kansas.
Informa lowered its estimate for the soybean harvest to 3.061 billion bushels from 3.139 billion bushels in August and 3.203 billion bushels in July, traders said. It pegged the average yield at 41.5 bushels an acre, down from 42.5 bushels per acre in its August projection and 43.1 bushels per acre projected in July.
In August, the USDA projected corn output at 12.914 billion bushels, with a yield of 153 bushels an acre, and soybean output at 3.056 billion bushels, with a yield of 41.4 bushels an acre. The government is slated to update its forecasts Monday.
Informa's estimates represent what it expects USDA will report Monday and its outlooks for "final harvest at this juncture," according to the firm.
"Generally warm and dry conditions stressed the filling of both corn and soybeans," Informa said in a report.
Informa also issued estimates for other crops. It pegged rice output at 185 million hundredweight, down from USDA's August estimate of 188.1 million hundredweight. Informa estimated cotton output at 17.467 million bales, up from USDA's August estimate of 16.55 million bales, and predicted the government will increase its estimate for cotton plantings by 930,000 acres to 14.66 million acres.
Informa's estimate is "the highest number you're going to see" for cotton, said independent analyst Mike Stevens, who said most investors will likely pay more attention to Monday's USDA report. He added the Informa forecast was "not a market event."
The USDA's monthly supply-and-demand report Monday is expected to have a bigger impact on the cotton market. Yet, even that number will be up for debate, as federal forecasters continue to assess the impact of Hurricane Irene and Tropical Storm Lee on crops.
IGC Launches Daily Index To Track Volatile Food Prices
The International Grains Council has introduced a daily grains and oilseeds index, in a sign that the need for a reliable tool to track the current volatility in food prices continues to be extremely high.
Food price inflation has been a key concern for most Asian governments and many are caught between the difficult choice of tightening monetary policy to rein in inflation and keeping it loose enough to sustain growth amid increasing signs of another global slowdown.
The index was earlier published once every week. The increase in the frequency is a signal that market participants don't expect the current volatility in prices to abate anytime soon despite bumper grains and oilseeds production from recent crops, fuelled mainly by the higher returns enjoyed by farmers as prices remain stubbornly high.
London-based IGC is an inter-governmental group for cooperation in grains trade. According to its latest forecast, global grains production will rise 3.4% in 2011-12 to hit a record 1.81 billion metric tons but will still lag consumption marginally.
That could mean continued volatility in prices as even a small supply disruption could tilt the balance in the market, forcing market participants to take cover.
Weekly and monthly indices are useful, but don't account for day-to-day price swings that have become more significant of late, said IGC's senior economist, Darren Cooper. Of the many food indices in the public domain, very few are available on a daily basis, he noted.
In addition to collecting and recording the prices, IGC takes a view on prices based on a plethora of information, Cooper said.
IGC's index, which was launched in March this year, stood at 294 points on Sept. 1, a 3% increase since the launch, despite consistent gains in production across the globe.
Analysts attribute this to rising global demand, restrictions paced on exports by key producing countries such as India, sharp increase in government's support prices for local farmers in Thailand and unusually dry weather in the U.S., the world's largest exporter of agricultural commodities.
The index provides a broad measure of food market conditions on a daily basis and is a useful tool if one wants a quick view of the current situation, Cooper said.
IGC compiles futures and physical export prices for eight individual commodities--wheat, corn, rice, barley, sorghum, soybeans, soymeal and rapeseed--at 22 origins worldwide.
Each commodity is assigned a weighting based on the five-year average of its globally traded volume. The weightings will be reviewed each January.
Brazil Secretary: 2011-12 Sugar Output Likely To Fall
Sugar production in Brazil, the world's top producer, is likely to fall to 37.07 million metric tons in the crop year that started April 1, the country's national secretary of production and agroenergy said Tuesday.
Brazil is estimated to have produced 38.17 million tons in 2010-11, Monoel Vicente F. Bertone told an industry conference.
"We have droughts last year, and this year we have a lot of frosts," he said.
The country's sugarcane output is likely to fall to 588.92 million tons in 2011-12 from 623.72 million tons, he added.
Bertone said the production of ethanol in the South American country is also falling because of the lower availability of sugarcane.
Sugar prices are rising faster than ethanol, which is tempting millers to produce more of the sweetener.
Separately, Datagro president Plinio M. Nastari said Brazil's ethanol production in 2011-12 is expected to fall to 22.6 billion litres from 27.4 billion litres last year.
Talking Points
Food Market Regulation Not Viable - FAO
Commodity market regulation is not a viable long-term option to combat the fundamental problems affecting the world agricultural sector, a senior executive of United Nations' food body said Tuesday.
Ann Tutwiler, deputy director-general of the Food and Agriculture Organization, said this year's surge in food prices has been driven by a "mismatch between supply and demand" that will only be solved by increasing investment in agriculture.
The Organization of Petroleum Exporting Countries "doesn't even do a great job of managing oil prices and they are dealing in a non-renewable resource," she told Dow Jones Newswires.
"Market regulation, to regulate prices, I just don't think is a viable option over the long term."
How far financial speculators are responsible for swings in commodities prices has become a topic of hot debate this year after food prices spiked to record highs for the second time in four years, sparking protests across the Arab world and other developing countries.
French President Nicolas Sarkozy, who blames speculative investors for the sharp rise, placed regulation at the top of the agenda for his leadership of the Group of 20 nations, but as yet no political consensus has been reached on how to better manage volatile commodity markets.
"I don't see any way that the [agricultural] sector is not going to be vulnerable to external commodity markets but it's about how you manage that," said Tutwiler.
In June, agriculture ministers for the G20 gathered here for an unprecedented meeting to address food price volatility. Although they put forward no concrete proposals to improve regulation, they did announce plans to create a global system to monitor crop production and stock levels, to be overseen by the FAO.
Critics say in countries like China or Russia--both of which play an increasingly important role in world agricultural markets--monitoring output is virtually impossible due to the disparate nature of production.
But Tutwiler said the FAO has both the resources and expertise to build such a system.
"The reality is that we know, because we have satellite that can tell us how much people are producing," she said. "We have a lot more access to information than governments often have that doesn't get used as it's not reported through government channels."
Her comments come as agricultural experts have gathered at the Organization for Economic Cooperation and Development in Paris to develop a more sustainable agricultural production system. Fundamental to the debate is how to meet growing world food consumption--the FAO predicts output will need to rise 70% by 2050 to meet demand--without contributing to climate change.
Tutwiler said that improving technology will be key to improving output in the future and all possibilities, even the controversial topic of genetically modified crops, shouldn't be taken off the table.
"Technology is the only way we've increased production over the past 50 years and it's the only way we're going to do it in the future," she said. "With the challenges we're facing in terms of food production I don't think we should reject any particular technology out of hand."
Pacific Neutral But La Nina Possible In 2011
A return to a La Nina climate event is still possible this year, but for now most oceanic and atmospheric indicators of such events are around neutral levels, the government's Bureau of Meteorology reported Tuesday.
The latest weekly data showed some sea surface temperatures are cooler than normal, the coolest since February but still within neutral thresholds, while trade winds are slightly stronger-than-normal in the western Pacific and cloudiness near the International Date Line has been below-average for the past two weeks, the bureau reported.
"Both of these indicators and the cooling of the ocean, are consistent with the possibility of La Nina developing later in the year," the bureau said in a weekly tropical climate note.
That said, most international climate model forecasts of El Nino and La Nina events show neutral conditions are likely to continue into the southern hemisphere spring, it said.
The bureau's Southern Oscillation Index measured +5.3 in the 30 days ended Sept. 4, up from +2.1 in August.
Sustained positive values above +8 of the SOI may indicate a La Nina, while sustained negative values below -8 may indicate an El Nino. Values between about +8 and -8 generally indicate neutral.
Typically, El Nino conditions result in below-average rainfall over much of eastern Australia while La Nina results in above-average rainfall over most of the continent.
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