Rabobank cuts corn, soybean, wheat price forecasts

Rabobank cut forecasts for corn, soybean and wheat futures, citing strong US row crop condition and a strong Chinese grains harvest, besides the surprise US inventory and acreage data which have sent prices to multi-month lows.

The bank cut its estimate for corn futures in the July-to-September quarter by $0.45 a bushel to $4.20 a bushel, foreseeing them falling to $4.07 a bushel in the October-to-December period, citing "good growing conditions".

While above-normal rainfall, of more than 8 inches, "in large parts" of Iowa and Illinois, major producing states, "may still reduce yields, conditions that are drier and cooler than normal in July could still lead to a significantly high yield", Rabobank said, itself foreseeing a 163-bushels-per acre result.

The US Department of Agriculture overnight raised by 1 point to 75% its estimate for the proportion of domestic corn in "good" or "excellent" condition.

Monday's US stocks data - showing inventories as of June 1 some 130m bushels above market expectations were "slightly bearish", it said, and implied stocks ending 2013-14 at more than 1.2bn bushels, above the current official forecast of 1.73bn bushels.

'Futures are overvalued'

For soybeans, the bank, which last week cautioned of "alarmingly tight" US inventories, slashed its forecast for average price in the newly-started quarter by $1.60 a bushel to $13.00 a bushel, with with prices set to fall to $11.20 a bushel in the October-to-December period.

"Our view is that November soybean futures are overvalued," the bank said, flagging the record us sowings of 84.84m acres, and an official condition rating for the crop which, at 72% good or excellent, is "the best June rating for soybeans on record".

However, the bank forecast "upward price volatility" in old crop futures for the next two months, despite the USDA estimating US soybean stocks as of June 1 at 405m bushels, well above market expectations.

"We still believe that demand rationing is needed," Rabobank said, with the June 1 stocks estimate, and a forecast for inventories to end 2013-14 at 125m bushels, implying use of less than 100m bushels a month during the last three months of the season.

"We have to go back 20 years to find monthly crush volumes below 100m bushels. The persistent tightness indicates that price rallies are still likely to occur through the summer."

'Driving prices lower'

For wheat futures, which were less affected by Monday's US data, the forecast for the average Chicago price in the July-to-September period was cut by $0.60 to $5.60 a bushel, the lowest for four years on a quarter-average basis.

"Improvements in the global wheat balance sheet during 2014-15, along with lower expectations of global feed and import demand, are driving wheat prices lower."

Falling demand expectations were underlined by weaker orders from North Africa a likely drop of 3m-4m tonnes in China's import needs, "following a higher quality harvest" than last year, when crops were damaged by rains.

However, lower availability higher quality wheat was providing "some price support", Rabobank said, flagging a prop for prices of Kansas City hard red winter wheat, a higher protein type, at $7.00 a bushel.

"US hard red winter wheat quality and volume remains in question."

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