Grain and oilseed prices jumped after US officials cut their
forecast for domestic corn stocks and, while raising hopes for the soybean harvest,
said that buyers would swallow up nearly all the extra supplies.
Closing crop prices
Chicago corn (December): $7.73 ¼ a bushel, +4.9%
Kansas wheat (December): $9.18 a bushel, +2.3%
Chicago wheat (December): $8.86 a bushel, +1.7%
Chicago soybeans (November): $15.48 ½ a bushel, +1.7%
London wheat (November): £202.00 a tonne, +1.3%
Paris wheat (November): E263.50 a tonne, +0.9%
The US Department of Agriculture, in its much-watched Wasde
crop report, downgraded its estimate for US corn inventories at the close of
2012-13 to 619m bushels, the lowest for 17 years, and a deeper reduction than investors
While the estimate for the harvest was trimmed by less than
investors had expected, reflecting a unexpectedly low figure for crop
abandonment to the worst drought since 1956, the USDA eschewed further cuts for
forecasts for domestic consumption of the grain.
On soybeans, the USDA upgraded by some 226m bushels to its
forecast for the US harvest, saying that sowings had exceeded previous
expectations, and with yields turning out better than had been feared too.
However, while the raise to the harvest estimate beat market
forecasts, so did USDA ideas for demand, which were seen sufficient to swallow
all but 15m bushels of the extra output.
The immediate market reaction was to push up grain prices
which had fallen into the report on expectations that the estimate revisions
would show a larger easing in the squeeze in US corn and soybean supplies.
Wasde corn data, change on last and (on market expectations)
Planted acres: 96.9m acres, +0.5m acres
Harvested acres: 87.7, acres, +0.3m acres, (+1.56m acres)
Yield: 122.0 bushels per acre, -0.8 bushels per acre, (-0.88 bushels per acre)
Production: 10.706bn bushels, -21m bushels, (+105m bushels)
End-stocks: 619m bushels, -112m bushels, (-39m bushels)
Chicago soybeans for November, up 0.7% ahead of the Wasde,
extended gains, if closing well off their intraday high.
Corn recouped small losses to post a gain of 5%,
helping wheat make headway of approaching 2%.
Slow pace of exports
The revisions to the corn crop reflected a small upgrade to
the estimate for harvested area, offset by a trim in the yield estimate to 122.0
bushels per acre, rather than the slight increase that analysts had forecast.
On demand, the USDA further reduced estimates for US corn exports, by 100m bushels to a 38-year low of 1.15bn bushels, "based on the slow
pace of sales to date and strong competition from Brazil".
However, it surprised many investors by sticking with a forecast that US livestock farmers will get through 4.15bn bushels
of the grain in 2102-13.
The forecast for farmgate corn prices over the season was
reduced, but by a modest $0.10 a bushel, to $7.20-8.50 a bushel, from the
September estimate, a smaller decline than sustained by futures over the past
For soybeans, production hopes received a twin boost from
ideas that the yield had come in better than previously feared, and by a
1.1m-acre upgrade to the estimate of harvested area, after spring sowings were
deemed larger than had been thought.
The estimate for the area harvested in Illinois, the
second-ranked producing state, was lifted by 450,000 acres, with those for
Indiana and North Dakota receiving 150,000-acre upgrades.
Wasde soybean data, change on last and (on market expectations)
Planted acres: 77.2m acres, +1.1m acres
Harvested acres: 75.7, acres, +1.1m acres, (+1.1m acres)
Yield: 37.8 bushels per acre, +2.5 bushels per acre, (+0.8 bushels per acre)
Production: 2.860bn bushels, +26m bushels, (+101m bushels)
End-stocks: 130m bushels, +15m bushels, (-4m bushels)
However, all but 15m bushels of the extra production was
seen being swallowed up by domestic crushers and, in particular, importers such
as China, whose purchases were seen rising to a record 61.0m tonnes.
Indeed, even though estimates for US stocks were kept near to
historic lows, those for other major consuming countries were edged higher,
suggesting that the USDA believes the extra domestic production will largely go
to allowing some breathing space in importing
'Put a floor under corn'
The data were viewed as broadly supportive to grain and
oilseed prices, with Richard Feltes at RJ O'Brien saying that "against a
backdrop of tight supplies and an uncertain 2013 South American season, we
think putting the October report in the rear view mirror will pre-empt new lows".
US Commodities said that the data had "put a floor under
And at Teucrium Trading, a New York-based issuer of agriculture-based
exchange traded funds, president Sal Gilbertie said that the data showed "very,
very" tight supplies of, in particular, corn, likely meaning more "price
rationing to prevent balance sheets becoming critically unbalanced".
Globally, "everyone is finding a tightening balance sheet,
and will likely see higher prices in the near future of basic food stuffs," Mr
He cautioned that historically, demand destruction had been
harder to achieve "than people suspect", signalling that, with US harvests
close to completion, consumption factors looked set to gain more attention in markets.