US predicts strong grain harvest but no price falls

Surprisingly strong harvests in the southern hemisphere could help ease global grain shortages, but high prices are likely to persist, the US government has forecast.

The US Department of Agriculture predicted that Brazil, one of the world’s biggest exporters of agricultural commodities, would enjoy a record soyabean crop and grow more corn than expected.

The report on Thursday will ease worries about extremely tight supplies that have caused agricultural prices to soar. But the USDA did not change the outlook for very low stocks of corn and soyabeans in the US, the largest exporter.

“If there’s a positive story out of this, it’s that the situation did not get worse,” said Chad Hart, agricultural economist at Iowa State University.

The USDA said that Brazil would this year harvest 70m tonnes of soyabeans, up from 68.5m tonnes forecast last month, and said the corn crop would reach 53m tonnes, up from 51m tonnes last month. The USDA also forecast that Argentina and Australia would each grow more wheat than previously thought.

Grain markets began to surge in the middle of 2010 after the worst drought in decades devastated wheat crops in the Black Sea region. A fiercely hot summer then diminished the US corn harvest. The US ethanol industry also refined record volumes of corn, consuming nearly 40 per cent of the crop.

With tight supplies pushing up prices, analysts had initially worried as La Niña, the Pacific weather phenomenon, af-fected the southern hemisphere growing season.

Summer began dry in Argentina, the second-largest corn and fourth-largest wheat exporter, and rains flooded eastern Australia, the third-largest wheat exporter. Rain delayed soya planting in Brazil. But André Pessôa, director of Agroconsult in the Brazilian city of Florianópolis, said crops in the country had quickly rebounded.

“This was supposed to be a year of problems in the weather,” he said. “But the yields we found in the fields are unbelievable so far.” New rains had damaged some crops as they were harvested, he warned.

Chicago corn futures dropped 0.6 per cent to $6.90¾ per bushel after the report. But soyabeans rose 0.2 per cent to $13.47 per bushel.

Wheat declined 1.1 per cent to $7.24¼ per bushel. The market is likely to remain range-bound until the USDA releases at the end of the month its first estimate for corn and soya planting in the 2011-12 season.

(Source: http://www.ft.com/cms/s/0/c5c57b62-4b55-11e0-b2c2-00144feab49a.html#axzz1GClFSCNo)