PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 17:07 GMT, Wednesday, 11th Oct 2017, by Mike Verdin
PM markets: corn futures dip amid ideas of US yield upgrade

It doesn't look like many investors are holding out for bullish data on Thursday.

The US Department of Agriculture is then to release its latest Wasde report, its flagship briefing on world crop supply and demand, and a key even for grain markets.

The prospect was not filling investors' minds with bullish thoughts in late deals on Wednesday, when grains in particular suffered fresh selling.

'Downturn in rains'

For corn, which for December stood down 0.8% at $3.46 a bushel in Chicago in late morning trading, not far above the contract closing low of $3.45 a bushel set in late August, the selling defied USDA data overnight showing the US harvest running at a historically slow pace of 22% completion.

Forecasts for US 2017-18 corn data in Wasde and (existing figure)

Harvested area: 83.531m acres, (83.496m acres)

Range of estimates: 83.1m-84.0m acres

Yield: 170.1 bushels per acre, (169.9 bpa)

Range of estimates: 168.7-171.5 bpa

Production: 14.204bn bushels, (14.184bn bushels)

Range of estimates: 14.06bn-14.355bn bushels

Year-end stocks: 2.289bn bushels, (2.335bn bushels)

Range of estimates: 2.168bn-2.450bn bushels

World year-end stocks: 201.91m tonnes, (202.47m tonnes)

Range of estimates: 196.7m-204.5m tonnes

Sources: USDA, Reuters

That was below the 29% figure that traders had expected, besides the 37% of US corn typically in the barn by now.

However, this slowdown was viewed as a temporary hiccup, with weather improving for fieldwork.

"A downturn in rains in central [Midwest] areas through late week will allow corn and soybean harvesting to improve again," said MDA.

History lesson

Meanwhile, a separate USDA table showing an unexpected improvement in the US corn condition rating was seen as underlining expectations of an upgrade in the Wasde to the forecast for the US yield.

The upgrade of 1 point to 64% in the proportion of US corn rated good or excellent "would support the idea that the USDA could revise its yield estimate higher in Thursday's report", said CHS Hedging.

At Halo Commodities, Tregg Cronin said that reports from what corn was being harvested "seem to be confirming the 'better than expected' narrative, as well as the USDA's rising crop production ideas".

He added that RJ O'Brien research signalled that "history is certainly on the side" of raised US corn crop ideas in the Wasde.

"There have been 13 years since 1990 in which the USDA raised the national average corn yield in September [Wasdes] from their August estimate, and in eight of those years, the October yield was also raised," Mr Cronin said.

Protein concern

For soybeans, "there have been eight years when the USDA raised yields in September from August, and six of those years saw further yield increases in October", Mr Cronin said.

Forecasts for US 2017-18 soy data in Wasde and (existing figure)

Harvested area: 89.017m acres, (88.731m acres)

Range of estimates: 88.5m-89.82m acres

Yield: 50.0 bushels per acre, (49.9 bpa)

Range of estimates: 49.1-52.1 bpa

Production: 4.447bn bushels, (4.431bn bushels)

Range of estimates: 4.335bn-4.490bn bushels

Year-end stocks: 447m bushels, (475m bushels)

Range of estimates: 375m-500m bushels

World year-end stocks: 96.48m tonnes, (97.53m tonnes)

Range of estimates: 93.9m-98.0m tonnes

Sources: USDA, Reuters

Still, it was some help to soybean futures that the USDA on Wednesday unveiled the export sale of 396,000 tonnes of US soybeans 264,000 tonnes to China, the biggest importer of the oilseed, and 132,000 tonnes to "unknown".

That said, there is a cloud over such demand, with Richard Feltes at RJ O'Brien noting "more chatter that China may be opting for more South American soy cargos in view of low protein reported on 2017 US soymeal", which could indicate a weaker quality US crop.

Soybean futures for November eased by 0.1% to $9.64 a bushel.

'Slowest progress on record'

In the wheat market, the prospect of drier weather has boosted the prospect of a pick-up in US sowings, after unusually slow progress so far.

At 48% complete, sowings are the slowest for the time of year on data going back to 1995.

Halo's Tregg Cronin said that "individual state progress is also interesting with Kansas," the top whet growing state, "just 27% seeded versus 58% average, and the slowest progress on record. 

"For a little perspective, the next slowest planting progress was 42% planted on this date in 1999."

Nebraska planting progress is also the slowest on record, with Oklahoma's at the slowest since 2001.

Hard vs soft

An interesting nuance on this is that all three states are major hard red winter wheat growers with plantings in major soft red winter growing states in the Midwest faring better.

Forecasts for 2017-18 wheat output in Wasde, (existing figure)

US year-end stocks: 946m bushels, (933m bushels)

Range of estimates: 928m-971m bushels

World year-end stocks: 262.8m tonnes, (263.14m tonnes)

Range of estimates: 258.0m-265.4m tonnes

Sources: USDA, Reuters

"Most soft red winter wheat states are at or ahead of average," Mr Cronin said.

This observation is "leading some to believe we will see a decline in hard red winter wheat acres, but stable-to-slightly-higher soft red winter wheat acres."

There was indeed some reduction in the discount of Kansas City-traded hard red winter wheat, which for December stood down 0.1% at $4.30 a bushel.

Chicago soft red winter wheat for December lost 0.2% to $4.34 a bushel, its premium down by 0.5 cents.

Cotton up

In Paris, December wheat stood down 0.95 at E161.50 a tonne in late deals, depressed also by some strength in the euro, which added 0.3% to $1.184 per E1.

However, back in the US, New York cotton for December added 0.1% to 69.03 cents a pound, amid ideas of a downgrade to US supply ideas in the Wasde, as the USDA factors in damage from hurricanes Harvey and Irma.

Traders expect a downgrade to the estimate for US carry-out stocks from 2017-18 by 250,000 bales to 5.75m bales, according to a Bloomberg survey.

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