US 2011 corn report could be bullish for fertilizer shares

11 October 2011 17:16  [Source: ICIS news]

HOUSTON (ICIS)--Fertilizer company shares could get a boost this week if the US Department of Agriculture (USDA) reports lower-than-predicted corn harvest numbers, a market analyst said on Tuesday.

A lower-than-predicted corn harvest would result in higher corn prices. Higher corn prices support fertilizer sales as plant nutrients become more affordable in a farmer's crop production budget.

The USDA will release its October World Agriculture Supply and Demand Estimates (WASDE) on Wednesday and analysts expect US corn production estimates to be trimmed anywhere from 25m bushels-100m bushels, depending on how much the harvested acreage and per acre yields are adjusted downward.

"The yield number may be revised lower by 0.5-1.5 bushels/acre (1.24-3.71 bushels/hectare) and the harvested acreage pushed lower by 0.5m-1.0m acres," said Dahlman Rose analyst Charles Neivert in a letter to clients.

In the September WASDE report, corn yield was estimated at 148.1 bushels/acre with 84.4m acres to be harvested for total production of 12.5bn bushels.

Neivert said a downward adjustment to the harvest would be slightly bullish news and fertilizer shares would be expected to move a bit higher.

Other analysts were suggesting this week, however, that USDA could report as much as a 134m-bushel increase in corn ending stocks from the September estimate of 920m bushels, a bearish signal to corn futures traders.

Ending stocks are the amount of corn remaining from the 2010 harvest after subtracting the amount used for feed, fuel, food and exports.

Globally, corn ending stocks are expected by traders to increase by 2.6m tonnes based on increases in production from the exporters such as the US, Argentina and Ukraine.

 


By: Frank Zaworski
+1 713 525 2653



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