Analysts expect a government report this week to show larger corn stockpiles as strong production in South America and a domestic price rally have weighed on demand for the grain.
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The U.S. Department of Agriculture is expected to forecast on Wednesday domestic corn stockpiles of 2.336 billion bushels in 2016-17, according to analysts polled by The Wall Street Journal, up from its June estimate of 2.295 billion bushels. Stockpiles next crop year are expected at 2.131 billion bushels, up from 2.11 billion bushels.
Abundant corn supply in South America, as Brazil and Argentina produce bumper grain harvests, is expected to pressure U.S. exports. Analysts say a recent rally in U.S. corn futures that saw prices rise to a one-year high on the back of weather concerns is only likely to exacerbate that trend.
"With the markets going up and the dollar fluctuating quite dramatically," said Jason Roose, an analyst at brokerage U.S. Commodities, "can we sustain strong demand?"
The USDA is expected to lower its forecast for domestic soybean stocks, however, with supplies of oilseed down to 434 million bushels this year from its previous estimate of 450 million bushels, and 483 million bushels next year from 495 million bushels.
Analysts will also be watching to see how the erratic start to the 2017-18 growing season will affect U.S. production and yield estimates. Wheat production is expected lower because of a drop in the agency's estimated spring wheat output to 414 million bushels from 534 million last year.
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The USDA is also expected to reduce corn and soybean yield estimates, though analysts say it is still too early in the growing season to make a clear assessment. Corn is currently in its critical yield-forming phase, while soybean's is yet to come.
High on traders' minds will be the weather, however, as problems for the crops mount.
"No need to pussy-foot around here," said Joel Karlin, an economist at Western Milling, in a note to clients. "This year's row crops especially corn is in big trouble as some of the most stressful growing weather since 2012 hits the Corn Belt at a most inopportune time."
The USDA is scheduled to release its monthly supply-and-demand report on Wednesday at noon EDT.
Write to Benjamin Parkin at firstname.lastname@example.org
(END) Dow Jones Newswires
July 10, 2017 19:14 ET (23:14 GMT)