4th Jul 2012, by Agrimoney
Goldman Sachs maintained the round of cautions over corn yield expectations as he US geared up for a searing-hot Independence Day, for which fire fears have seen many celebrations cancelled.
The bank warned that a corn yield estimate cut to 153.5m bushels an acre less than a week ago may already be too generous thanks to the extent of the US heatwave, whose impact on crops has been heightened by wind storms last weekend spreading east from the Midwest.
Many commentators have struggled to keep up with the extent of the US corn crop's decline, evident in a sharp decline in official condition ratings, with Macquarie last Thursday cutting its yield rating for the second time less than a week.
Goldman Sachs had warned that "downward revisions" to its corn yield forecast were likely "if weather deteriorates further", analyst Damien Courvalin said.
"In fact, weather forecasts... point to worse weather conditions in July, creating downside risk to our corn yield forecast", he added.
At Barclays Capital, Sudakshina Unnikrishnan said that Midwest forecasts "continue to point to the persistence of abnormally hot weather and the lack of precipitation".
September vs December
Actually, the US GFS weather model has pointed to cooler temperatures kicking in this weekend in the Midwest, with potentially some rain too, although traders have placed more credence with the European model, which suggests a drier outlook.
Nonetheless, the GFS forecast may have prevented Chicago's benchmark December corn futures contract gaining more than the near-3% it achieved on Tuesday.
"Some in the trade felt that the market was held back from a limit-up move [$0.40-a-bushel, equivalent to 6%] due to the US weather model continuing to expect… some much-needed cooler temperatures to move across the main core of the belt late this weekend and into next week," Jon Michalscheck at Benson Quinn Commodities said.
The September contract fared a little better, rising by more than 3%, and reducing its discount to the December lot to 0.5 cents.
The discount stood above 5 cents a week ago.
However, thanks to the crop damage, "the amount of US corn harvested before September will be smaller than the US Department of Agriculture expects, limiting further downside" to the price of the September contract versus the December lot, Goldman Sachs said.
Wild fires
US markets are closed on Wednesday for Independence Day celebrations which are to be unusually devoid of firework displays because of the risk of causing wildfires, which have already scorched an estimated 2m acres this year.
These included New Mexico's largest wildfire on record, across 300,000 acres.
Temperatures today are expected to range from 90 degrees Fahrenheit to more than 100 degrees from the Plains to the east coast, according to official US meteorologists.
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