PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 17:47 GMT, Wednesday, 11th Jun 2014, by Agrimoney.com
Grain, soybean prices fall after world supply hopes raised

Oilseed and, especially, grain prices lost ground after US officials, in a much-watched crop report, raised estimates for world supplies of corn, soybeans and wheat, surprising investors, who had expected downgrades.

Chicago wheat futures for July, which had stood marginally higher in ahead of the data, fell to $5.92 a bushel immediately afterwards, a drop of 1.5% on the day, and the weakest for a spot contract since February.

In Paris, November wheat futures touched E189.00 a tonne, matching the lowest price for a spot contract since September.

Chicago corn futures for July lost gains to stand at $4.42 a bushel for July delivery, down 0.8% on the day and the weakest price for a spot contract in nearly four months.

The soybean market displayed marked volatility, trading over a 10-cent trading range over a four-minute spell which took it both into positive and negative territory, before settling down to show a small decline.

'Improved growing conditions'

The price moves followed the release of the US Department of Agriculture's monthly Wasde crop report which confounded expectations by raising estimates for world stocks of corn, soybeans and wheat at the close of 2014-15.

Wasde corn data, change on previous and (on market forecast)

US ending stocks 2013-14: 1.146bn bushels, unchanged, (-24m bushels)

US ending stocks 2014-15: 1.726bn bushels, unchanged (+10m bushels)

World ending stocks 2013-14: 169.05m tonnes, +630,000 tonnes, (+700,000 tonnes)

World ending stocks 2014-15: 182.65m tonnes, +920,000 tonnes, (+1.13m tonnes

Sources: USDA, ThomsonReuters

For corn, the estimate for world inventories was nudged higher by 80,000 tonnes to a 15-year high of 182.65m tonnes, reflecting increased expectations for crops in the European Union, where Germany has enjoyed "improved early season growing conditions", and the former Soviet Union.

The Russian harvest was upgraded by 500,000 tonnes, and Ukraine production hopes by 1.0m tonnes, thanks to ideas that farmers used better seed than thought, with "the latest trade data for both countries [confirming] further expansion in the use of imported hybrid seed corn", the USDA said.

In the US, the harvest estimate, and indeed the whole 2014-15 balance sheet, was left unchanged, with "slightly slower-than-normal mid-May planting progress expected to be offset by very favourable early season crop and weather conditions".

Wheat upgrade

For wheat, the estimate for world stocks at the close of 2014-15 was raised by 800,000 tonnes to 188.6m tonnes, again thanks to improved hopes for EU and former Soviet Union crops, as well as Chinese and Indian harvests, which offset a downgrade to expectations for US output, and improved ideas for feed demand too.

Wasde wheat data, change on previous and (on market forecast)

US ending stocks 2013-14: 593m bushels, +10m bushels, (+3m bushels)

US ending stocks 2014-15: 574m bushels, +34m bushels, (+22m bushels)

World ending stocks 2013-14: 186.05m tonnes, +580,000 tonnes, (-10m tonnes)

World ending stocks 2014-15: 188.61m tonnes, +1.19m tonnes, (+1.61m tonnes

Sources: USDA, ThomsonReuters

"European Union production is raised 1.4m tonnes as spring and early summer rainfall support higher yield outlooks for France, Germany, Poland, Romania, and Bulgaria," the USDA said.

The estimate for the Indian crop was upgrade by 1.85m tonnes to a record 95.85m tonnes.

Mixed picture

For soybeans, the end-stocks estimate for 2014-15 was lifted by 650,000 tonnes to a record 82.88m tonnes, again contrasting with expectations of a small downgrade.

Wasde soy data, change on previous and (on market forecast)

US ending stocks 2013-14: 125m bushels, -5m bushels, (-2m bushels)

US ending stocks 2014-15: 325m bushels, -5m bushels, (+6m bushels)

World ending stocks 2013-14: 67.17m tonnes, +190,000 tonnes, (+710,000 tonnes)

World ending stocks 2014-15: 82.88m tonnes, +650,000 tonnes, (+910,000 tonnes

Sources: USDA, ThomsonReuters

However, the picture of ample supplies was clouded by a downgrade to estimate for US inventories at the end of this season to 125m bushels (8.84m tonnes), equivalent to 3.7% of consumption, the lowest stocks-to-use ratio on records going back to the 1960s.

This ratio is a key influence on pricing, indicating the extent to which buyers are likely to need to pay up to secure supplies.

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