U.S. corn supply seen tight; soy stocks shrinking

CHICAGO (Reuters) - Easing demand for U.S. corn amid high prices and prospects for a bigger-than-expected 2008 crop will prompt USDA to boost its estimate of corn supply for the coming year in Friday’s report, analysts said.

Even so, U.S. corn stocks will likely reach their lowest level in 13 years by September 2009 given the world’s need for food and feedstock for corn-based ethanol production.

Soybean stocks are seen even tighter as robust demand coupled with a smaller-than-expected U.S. harvest could keep the domestic stockpile historically low.

“We’re building a cushion on corn, doing a better job of rationing corn. Soybeans it says that we’re going to have a very tight old-crop situation and that whole situation carries into new crop,” Don Roose, U.S. Commodities analyst, said.

“Ultimately, we’re going to have to get a decent yield and have South America help us with the balance tables from a world perspective.”

USDA will issue its monthly crop report at 8:30 a.m. EDT on Friday. The numbers will reflect the government’s latest crop data revealed on June 30 in its acreage and quarterly stocks reports.

Last month, USDA forecast that U.S. farmers planted more corn than most analysts expected. That would relieve some of the tightness in supply. The government also reported June 1 corn stocks about 1.3 million bushels higher than analysts estimated — evidence that high prices were limiting use.

In contrast, USDA confirmed tight soybean stocks and said farmers would harvest fewer soy acres than previously thought, 72.1 million, taking into account expected losses from the worst flooding that hit the Midwest in 15 years.

On average, analysts said they expect USDA to put 2008/09 U.S. corn ending stocks at 794 million bushels, up 121 million from its June estimate. Old-crop corn stocks were seen at 1.499 million bushels, 66 million higher than USDA’s June forecast.

For 2008/09 U.S. soybean stocks, analysts on average estimate 137 million bushels, down 38 million from June. That would be slightly higher than its current 2007/08 soybean end stocks forecast for 125 million.

That is roughly a two-week supply and the lowest since 2003, when it fell to 112 million bushels — the smallest in at least 25 years.

“It’s really a game of how low will USDA take their ending stocks number,” said Bill Nelson, an analyst with Wachovia Securities.

To keep a manageable supply of soybeans USDA will have to trim back on demand projections for 2008/09, analysts say.

“USDA is still indicating an increase in carry-over for next year. But it depends on what they do with new-crop usage — part of that will be to fit within the envelope of supplies,” Anne Frick, Prudential Financial analyst said.

BIG U.S. WHEAT CROP; STOCKS BUILD

For wheat, the market focus will be on USDA’s wheat output forecast and 2008/09 wheat end-stocks.

U.S. farmers are poised to harvest their biggest wheat crop in 10 years, 2.4 billion bushels, which will boost supplies.

Analysts on average see U.S. wheat stocks at 536 million bushels by June 2009, up from 306 million bushels as of June 2008 — a 60-year low.

“On the wheat, basically we’re adding beginning stocks, and also production,” said Shawn McCambridge, Prudential Financial analyst.