Corn, soy prices dive after US lifts supply hopes

Corn and soybean prices plunged, dragging wheat lower too, after the US said it had far more of the crops in stockpiles than had been thought, and said that soybean sowings would break a record by more than 7.4m acres.

New crop corn futures for December, the best-traded lot, tumbled nearly 5% to a contract low of $4.25 a bushel in Chicago.

The new crop November soybean contract plunged 5.2% to $11.64 a bushel, its lowest in nearly four months.

Chicago wheat for September dropped 4.4% to $5.67 a bushel, the contract's lowest since January.

The declines followed the release by the US Department of Agriculture data showing domestic stocks of the grains significantly bigger than had been thought, implying less pressure on buyers to pay up to secure supplies.

Extra supplies

For corn, US inventories as of June 1 were estimated at a four-year high of 3.85bn bushels.

Stocks data, change on market estimate and (year on year)

Corn: 3.86bn bushels, +139m bushels, (+1.095bn bushels)

Soybean: 405m bushels, +27m bushels, (-30m bushels)

Wheat: 590m bushels, -8m bushels, -128m bushels

US inventories as of June 1. Source: USDA

While investors had expected a significant rebuild from last year, thanks to last year's record harvest, the extent of the recovery - up 1.1m bushels or 39% year on year - was some 130m bushels more than investors had expected.

For soybeans, US inventories were 405m bushels. While down 30m bushels year on year, and at their lowest since at least the 1980s, the figure was 27m bushels above expectations.

As an extra setback to soybean prices, the USDA estimated plantings at a record 84.8m acres a far bigger figure than the 81.5m acres than it estimated after a farm survey in March.

The soybean sowings figure was also 2.7m acres bigger than the market had forecast.

While strong soybean prices have encouraged growers to plant the crop, the USDA also highlighted that "planting conditions were much improved with last year, when wet conditions delayed planting in many areas of the Corn Belt and Delta".

In fact, this year, soybean sowings are in line with those last year, or ahead, in all 31 major producing states except Oklahoma.

Grain dynamics

For corn sowings, the estimate of 91.64m acres, was 50,000 acres smaller than the USDA's March report had indicated, and below market expectations too.

Acreage data, change on market forecast and (on March 31 estimate)

Corn: 91.641m acres, -84,000 acres, (-50,000 acres)

Soybeans: 84.839m acres, +2.685m acres, (+3.346m acres)

Wheat: 56.474m acres, +656,000 acres, (+659,000 acres)

Incl spring wheat: 12.709m acres, +859,000 acres, (700,000 acres)

However, the 84,000-acre drop below traders' forecasts was deemed relatively small in production terms, limiting the support to futures.

For wheat, June 1 stocks were, at a six-year low of 590m bushels, actually a little below expectations.

However, any bullish impact was more than offset by a plantings estimate for spring wheat of 12.7m acres up 10% year on year and well above expectations.

'Bearish across the board'

The data were "bearish across the board", broker CHS Hedging said.

Steve Kahler, chief operating officer at Teucrium Trading, an issuer of commodity exchange traded products. Said the reports showed that corn and soybean supplies "are higher than expected, and there is no sign of the tap being turned off".

Whether the higher-than-expected stocks data were down to, say, disappointing feed demand or, for soybeans, strong imports, will become clearer on July 11, when the USDA unveils its monthly Wasde crop report.

"That will give more clarity on exactly what categories within supply and demand leant to the stocks, to leave them higher than expected."

What will key US data show? History gives some guidance...
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