Corn has the highest potential for gains, with the market getting tight in the second quarter, while wheat prices will likely only follow moves in corn, CHS’s Baker said. Wheat may advance if the crop in Australia, the second-biggest exporter, disappoints, coming in at 19 million to 20 million tons, he said. Australia cut its output estimate to 22.5 million tons in 2012-13 from a record 29.5 million tons a year earlier, the Australian Bureau of Agricultural and Resource Economics and Sciences said Sept. 11.
While grain costs climbed, livestock producers haven’t yet made large cuts in output, Morgan Stanley’s Allidina said. The hog herd in the U.S., the world’s biggest pork shipper, was 67.5 million head on Sept. 1, 0.4 percent larger than a year earlier, the USDA said Sept. 28. Feedlot inventories were 10.637 million cattle Sept. 1, only 0.6 percent smaller than a year earlier. Cattle herds globally may shrink by about 0.3 percent this year, while hog supplies increase 2.6 percent, the USDA estimates.
U.S. corn production may drop to 10.727 billion bushels, the smallest in six years, while soybean output may be 2.634 billion bushels, a nine-year low, the USDA said Sept. 12. The agency will update its projections on Oct. 11. Declining output may send world stockpiles of both crops to 177 million tons by the end of the marketing year, or about 16 percent of demand, the tightest since the 1975-76 season, USDA data show.
“Inventories are the tightest they’ve been in my lifetime, especially when adjusted for demand, and there’s no spare capacity,” Allidina said. “We can’t afford anything below trend line yields in Argentina, Brazil and the U.S. because we’re sitting on nothing.”