Nogger's Blog

13/01/11 -- The Argy soybean crop "isn't likely to top 40 million tons" whilst corn output "is unlikely to top 17.5 million tons this season" said Argy analysts AgriPac earlier this week.

Unsurprisingly the USDA disagree, yesterday pegging bean output there at 50.5 MMT and corn production at 23.5 MMT. Although they were down on their December estimates (by 1.5 MMT on each) that still places them way above the AgriPac numbers. So who is likely to be nearer the mark?

Another well-known South American analyst Kory Melby says that yesterday's USDA estimates are probably 5 MMT too high on both beans and corn. That suggests corn production of 18.5 MMT, much closer to AgriPac's ideas. Considering that world ending stocks/use is already the second tightest in the last 35 years using yesterday's USDA numbers, then that's pretty significant if we were to lop another 5 MMT off the bottom line.

It should also be noted that almost half of those corn stocks are in China (60 MMT), which means that a) they probably don't all exist b) they won't be coming onto the open market c) we are reliant on them having a crop of 168 MMT this year to even manage to hit that target.

Now the Chinese authorities tell us that they are in for a crop around 4/5 MMT in excess of the USDA's targeted 168 MMT, but let's face it we don't really believe a word they say do we? Other private estimates are as much as 13 MMT lower than the USDA.

So IF the USDA are calling the Argy and Chinese corn crops correctly we have 55 days worth of supply to end 2010/11. What does it mean if they're wrong? Take 5 MMT off Argentina and 10 MMT off China's production and we come down to less than 49 days worth of supply - and that's if China really does have 60 MMT of reserves in store.

Having auctioned off in excess of 40 MMT of state-owned reserves in the last twelve months in a failed attempt to keep rising prices under control that seems pretty unlikely to me.