Wheat futures extended gains, and corn prices rose
temporarily to a four-month high, after strong export prospects prompted US
officials to cut forecasts for domestic inventories by more than investors had
However, soybean prices fell, after the forecast for US
stocks of the oilseed was not downgraded, despite a large pace of export sales.
The US Department of Agriculture, in its much-watched
monthly Wasde crop report, cut its forecast for domestic wheat inventories at
the close of 2013-14 by 50m bushels – 10 times the downgrade that traders had
The revision, which left the US on course for its lowest
carryout stocks in five years, reflected an increase to 1.18m bushels (32.0m
tonnes) in the forecast for exports, besides a small uplift in the estimate for
wheat used by domestic flour mills.
"Exports are projected higher as reduced competition
from Argentina, and strong sales and shipments, further boost prospects for US
wheat in world trade," the USDA said.
For corn, the USDA slashed its forecast for domestic stocks
at the close of 2013-14 by 150m bushels to 1.481bn bushels, again figure well
Wasde US end-stocks data, change on last and (on market forecast)
Corn: 1.481bn bushels, -150m bushels, (-138m bushels)
Soybeans: 150m bushels, unchanged, (+7m bushels)
Wheat: 558m bushels, -50m bushels, (-45m bushels)
Indeed, brokers had not entertained thoughts of a figure below 1.57bn
Again, the downgrade reflected a higher export estimate,
following a strong start to the season for US sales.
"Reduced foreign export prospects lower competition for
US corn in the world market," the USDA said, cutting by 1.0m tonnes its
forecast for Argentine shipments, in line with a downgrade to production hopes
for the South American country.
"Additional [Argentine] dryness in January reduces
expected plantings and trims yield prospects."
The revision to the US corn balance sheet highlighted the
change in market dynamics after last year's record harvest, said Steve Kahler, chief
operating officer at Teucrium Trading, an issuer of commodity-based exchange traded
"What the report is showing is that as we move from a period
of high prices that reduced demand, the lower prices are buying some corn
Use of corn in feed and making ethanol is expected to rise
steeply in 2013-14 too.
The immediate impact on futures was to send corn futures for
March to $4.49 a bushel in Chicago, the highest for a spot contract since
October, although the lot had eased back to $4.45 ¼ a bushel half an hour
after the report, a gain of 0.2% on the day.
The level of $4.50 a bushel has been seen as a difficult
one for the contract to break through, amid expectations that it will spark a
rash of selling by US producers who have been hoarding much of last year's
record harvest in expectation of higher prices.
Wheat futures for March rose 2.3% to $5.90 ¾ a bushel for March
delivery before also losing some ground.
Soybean futures for March stood down 0.4% at $13.26 a
bushel, after the USDA kept at 150m bushels its forecast for domestic stocks of
the oilseed at the close of 2013-14, despite a rapid pace of exports.