Grain, soy prices dip despite US stocks downgrades

Grain and oilseed prices fell despite US officials cutting hopes for domestic corn and soybean supplies, citing strong exports, and downgrading dryness-hit soybean crops in Brazil and Paraguay too.

The US Department of Agriculture, in its much-watched monthly Wasde crop briefing, lowered by 25m bushels to 1.456bn bushels its forecast for domestic corn stocks at the close of 2013-14, a bigger drop than expected by investors.

The downgrade reflected "stronger world imports and the rising pace of [US] shipments in recent weeks", the USDA said, raising its forecast for US exports over the season by 25m bushels to 1.175bn bushels (41.3m tonnes).

That represents a 122% rise on last season's exports, which were undermined by a dearth of supplies following the drought-hit US harvest in 2012.

'Continued strong sales'

In soybeans, the USDA defied expectations too by cutting its forecast for domestic stocks at the end of 2013-14 by 5m bushels to 145m bushels, again reflecting strong US exports.

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

US end stocks, 2013-14: 1.456bn bushels, -25m bushels, -32m bushels

World end stocks, 2013-14: 158.47m tonnes, +1.17m tonnes, +2.2m tonnes

Argentine harvest, 2013-14: 24.0m tonnes, unchanged, +650,000 tonnes

Brazilian harvest, 2013-14: 70.0m tonnes, unchanged, +970,000 tonnes

The department flagged "continued strong sales and shipments through February", raising its forecast for exports by 20m bushels to a record 1.53bn bushels, a rise offset in part by an increase to the forecast for imports.

The revisions leave the US on course for year-end inventories, compared with stocks, of 4.38% - the tightest in 48 years, and a figure that might be expected to support prices.

Tight inventories imply that buyers have to compete harder, and pay more, to secure supplies.

Indeed, the USDA raised by $0.25 a bushel to $12.20-13.70 a bushel its forecast for the average soybean price that domestic growers receive this season.

Prices drop

Nonetheless, soybean futures for May tumbled by 2.5% to stand at $14.21 a bushel an hour or so after the report, on a move blamed on "buy the rumour, sell the fact" selling.

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

US end stocks, 2013-14: 145m bushels, -5m bushels, +4m bushels

World end stocks, 2013-14: 70.64m tonnes, +2.37m tonnes, -820,000 tonnes

Argentine harvest, 2013-14: 54.0m tonnes, unchanged, +500,000 tonnes

Brazilian harvest, 2013-14: 88.5m tonnes, -1.5m tonnes, +360,000 tonnes

"Funds have been buying heavily on ags in the run up to the report, and I think were in a mind to sell unless there was something really shocking in the Wasde, which there was not," a UK grain trader told

Furthermore, there has been talk of China cancelling a series of soybean import orders from Brazil.

And in the US, Steve Kahler, chief operating officer at Teucrium Trading, an issuer of exchange-traded commodity products, highlighted that, looking at the world balance sheet, there may have been some disappointment that the USDA did not make a bigger downgrade to its estimate for the Brazilian crop.

Brazil's harvest was cut by 1.5m tonnes to 88.5m tonnes, demoting it back to second place behind US production, pegged at 89.5m tonnes, with some ideas that even this is an underestimate.

"The relatively small downgrade for Brazil and Paraguay production left people a bit disappointed," Mr Kahler said.

Corn drops

On corn too, some investors had expected a bigger upgrade to expectations for US exports, Mr Kahler said.

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

US end stocks, 2013-14: 558m bushels, unchanged, -12m bushels

World end stocks, 2013-14: 183.81m tonnes, +80,000 tonnes, +160,000 tonnes

Corn futures for May were down 2.5% at $4.76 a bushel.

Wheat, for which the Wasde made no changes to the US balance sheet and relatively few revisions to world estimates, was 1.0% lower at $6.47 a bushel in Chicago for May delivery.

EU, Russia export upgrades

One investor also highlighted to the lack of mention of the Ukraine crisis in the report, or indeed in news reports over the weekend.

Indeed, one of the changes the USDA did make to the world wheat balance sheet was to upgrade the estimate for Russian exports by 1.0m tonnes to 17.5m tonnes.

The forecast for European Union shipments in 2013-14 was raised too, by 1.5m tonnes to a record 29.0m tonnes.

Export business "has remained strong" for both the EU and Russia "well into the second half of the 2013-14 marketing year as prices remain attractive for buyers in the Middle East and North Africa," the USDA said.

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