PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 18:40 UK, 12th Jul 2017, by Mike Verdin
Corn, winter wheat drag grains lower, as US supply hopes top expectations

Corn and winter wheat futures led grains lower, undermining resilience in soybean and spring wheat prices, after US officials, in long-awaited crop data, held with their corn yield forecast despite dryness in parts of the Corn Belt.

Futures closing prices on Wednesday

Soybeans, (November): $10.34 a bushel, -0.8%

Minneapolis hard red winter wheat, (September): $7.82 ¾ a bushel, -1.8%

Chicago soft red winter wheat, (September): $5.37 a bushel, -2.9%

Corn, (December): $3.98 ¾ a bushel, -3.7%


Corn futures for December plunged 3.9% at one point, falling below $4 a bushel, after the US Department of Agriculture, in its much-watched Wasde briefing, confounded expectations of most investors by sticking by estimates for a strong US yield this year, of 170.7 bushels per acre, despite deteriorating crop condition.

The USDA acknowledged that "during June, harvested-area weighted precipitation for the major corn producing states was below normal".

However, the rainfall shortfall "did not represent an extreme deviation from average", the department said, pegging US corn stocks at the close of 2017-18 at 2.325bn bushels – an upgrade of 215m bushels from last month, and well above market expectations too.

Winter vs spring

Winter wheat futures, meanwhile, for September tumbled by 3.2% in Chicago in initial deals after the Wasde pegged US winter wheat production at 1.32bn bushels, some 70m bushels above investor forecasts.

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

US yield: 170.7 bushels per acre, unchanged, (+1.1bpa)

US production: 14.255bn bushels, +190m bushels, (+129m bushels)

US stocks, close of 2016-17: 2.370bn bushels, +75m bushels, (+49m bushels)

US stocks, close of 2017-18: 2.325bn bushels, +215m bushels, (144m bushels)

World stocks, close of 2016-17: 227.51m tonnes, +2.94m tonnes, (+1.79m tonnes)

World stocks, close of 2017-18: 200.81m tonnes, +6.48m tonnes, (5.48m tonnes)

Sources: USDA, Reuters

The USDA flagged "both higher harvested acreage and yield".

Eventually, the weakness weighed on Minneapolis-traded spring wheat too, snuffing out a recovery which had seen the September contract return to positive territory, after the USDA pegged the US other spring wheat harvest at 423m bushels, in line with market expectations.

The durum crop estimate, at 57m bushels, was 21m bushels beneath market hopes.

"The production forecasts for durum and other spring wheat indicated a significant decline compared to last year for these two classes primarily due to severe drought conditions affecting the northern US Plains," the department said.

Soybean export upgrade, but…

Soybean futures also showed early resilience, with some disappointment that the USDA did not reduce its estimate for this year's domestic yield offset somewhat by the boost to sentiment from an export upgrade which cut the forecast for season-end stocks below broker expectations.

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

US yield: 48.0 bushels per acre, unchanged, (+0.1bpa)

US production: 4.260bn bushels, +5m bushels, (+17m bushels)

US stocks, close of 2016-17: 410m bushels, -40m bushels, (-20m bushels)

US stocks, close of 2017-18: 460m bushels, -35m bushels, (-13m bushels)

World stocks, close of 2016-17: 94.78m tonnes, +1.57m tonnes, (+1.66m tonnes)

World stocks, close of 2017-18: 93.53m tonnes, +1.31m tonnes, (+1.39m tonnes)

Sources: USDA, Reuters

"Soybean exports for 2016-17 are projected at 2.10bn bushels, up 50m, reflecting shipments and outstanding sales through early July," the USDA said, while trimming its estimate of the season's US soybean crush on "lower projected soymeal exports and domestic use".

Still, the forecast for world soybean inventories at the close of 2017-18, at 93.53m tonnes, was 1.4m tonnes ahead of market expectations, reflecting a boost to the Chinese stocks estimate from raised ideas on the country's own production, and imports.

"Soybean production is raised for China due to increased harvested area."

'Looking inflated'

The data were termed by Terry Reilly at Chicago broker Futures International as "overall bearish".

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

US production: 1.760bn bushels, -64m bushels, (+12m bushels)

Includes other spring wheat: 423m bushels, n/a, -+7m bushels

US stocks, close of 2017-18: 938m bushels, +14m bushels, (62m bushels)

World stocks, close of 2016-17: 258.05m tonnes, +1.62m tonnes, (+2.70m tonnes)

World stocks, close of 2017-18: 260.60m tonnes, -590,000 tonnes, (3.24m tonnes)

Sources: USDA, Reuters

"USDA did not revise the soybean and corn yields, which ruffled up the trade average, versus actual, for US corn and soybean production, leaving ending stocks for 2017-18 looking inflated, at least for corn," Mr Reilly said.

At Global Commodity Analytics, Mike Zuzolo said: "The trade is likely going to feel even more comfortable being long soybeans/short corn until more is known about the [US] weather."

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