Global Grain Supplies Remain Uncomfortably Low

The U.S. Department of Agriculture hiked its estimate of the 2012 corn crop by 0.2%, contrary to the expectations of many analysts for a slight reduction. Farmers are now expected to harvest 10.725 billion bushels of corn, according to the USDA's latest Crop Production report released November 9.

Still, the USDA numbers shouldn't be surprising, even though the report initially sent CME Group corn futures down in early trading, according to Darin Newsom, DTN's senior grain analyst.

The corn market's inverted forward price curve "continues to indicate a bullish long-term commercial outlook," Newsom wrote in a report. "There was nothing in the reports that would seem to suggest domestic or global supply and demand is approaching comfortable levels, particularly given the early crop situation in South America."

Soybean futures declined after the USDA's revised crop estimate, 2.97 billion bushels, also topped expectations. But the bigger story was the USDA's increase in estimated soybean exports for 2012-13, indicating strong global demand. "Again, the initial reaction is bearish while the long-term fundamental outlook remains bullish," Newsom said.

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