G Chandrashekhar

US prospective plantings report has potential to tame inflation

| Updated on: Apr 02, 2014

Subject to normal weather, the US is likely to have record harvests of soyabean, cotton and corn in the coming mont

Amid ongoing weather concerns, the prospective plantings report of the US Department of Agriculture offers the potential to boost global agricultural trade this year.

The prospective planting report, released recently, estimates that the total acreage for the eight major US crops including corn, wheat, soyabean and cotton may top 255 million acres. This is the second highest level since 2007 and some 2 million acres below the levels seen in 2012.

This comes at a time when speculative long positions are being built on the bourses and prices of major crops have spiked by 10-12 per cent. The report comes as a relief for grain handlers and traders.

Strong selling

The continued higher acreage in the US combined with the expectation of trend-line yields in 2014 is likely to deliver higher carryover stocks in 2014, most notably in corn.

This will also mean there will be strong near-term selling of large on-farm stocks. The prospective plantings report suggests a six per cent year-on-year increase in the US soyabean acreage to a record 81.5 million acres.

The US is the world’s largest producer of soyabean (89 million tonnes). However, bean inventories have dropped to a decade’s low. Cotton acreage is expected to be up by seven per cent with acreage seen at 11 million acres.

For wheat, the expectation is that acreage may be down by one per cent to 55.8 million acres. Corn plantings are likely to drop 4 per cent, at 91.7 million acres.

Weather influence

Despite this, there is pressure on corn prices because inventories are 30 per cent higher and there is expectation of a large carryover stocks. Subject to normal weather, record harvests of soyabean, cotton and corn is likely in the US in the coming months.

It will rein in food inflation and provide relief to food import-dependent countries. It will also support the grains and oilseeds origination business of large agribusiness corporates. Speculative funds currently at play will exit the market when prospects of large harvests and softer prices crystallise.

Published on April 03, 2014

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