Soybean futures jumped to their highest levels since July,
helping corn futures recover from contract lows, after US officials made a
surprise downgrade to their forecast for the domestic yield.
The US Department of Agriculture, which two weeks ago cut
its estimate for the 2016 US soybean yield, on Thursday downgraded the 2017 one
too, by 0.4 bushels per acre to 49.5 bushels per acre.
The unexpected move, which contrasted with investor
expectations of a small increase in the 2017 yield figure, was offset in
production terms by an increase in the estimate for soybean sowings, which were
now seen topping 90m acres for the first time.
"Acreage updates were made in several states based on a
thorough review of all available data," the USDA said, while stressing in its
yield estimate "a lower pod count from the previous year" in major growing
Nonetheless, the outcome of the revisions was to leave the USDA's
estimate for US soybean carryout stocks below market expectations, although
they will remain the highest in 11 years.
'Friendly' soy, 'bearish'
Chicago soybean futures for November, which stood only
marginally higher ahead of the data, extended their gains to 2.4% in the aftermath,
taking the contract to $9.88 ½ a bushel, their highest in more than two months.
The gain was credited with sparking a recovery in futures in
corn too, whose immediate reaction to the USDA data, released in the
much-watched Wasde crop report, had been to extend earlier losses, sending the December
contract to a contract low of $3.42 ½ a bushel.
US soy forecasts 2017-18, change on previous and (on market estimates)
Harvested area: 89.471m acres, +740,000 acres, (+454,000 acres)
Yield: 49.5 bushels per acre, -0.4 bushels per acre, (-0.5 bushels per acre)
Production: 4.431bn bushels, unchanged, (-16m bushels)
Year-end stocks: 430m bushels, -45m bushels, (-17m bushels)
World year-end stocks: 96.05m tonnes, -1.48m tonnes, (-430,000 tonnes)
Source: USDA, Reuters, Agrimoney.com
An hour after the data was released the contract stood at
$3.50 ½ a bushel, a gain of 1.3% on the day.
Benson Quinn Commodities termed the Wasde "friendly" to
soybean prices, in "lowering yield and carryout" estimates.
While the report was "bearish" for corn - and indeed wheat –
prices, futures were "following soybeans" higher, the broker said, viewing elevated
ideas on supplies of the grains as already "priced in" by investors.
Corn vs soy
In fact, the USDA lowered its estimate of US corn sowings
this year by 500,000 acres to 90.4m acres – leaving the figure only 200,000 acres
above that for soybeans.
US corn forecasts 2017-18, change on previous and (on market estimates)
Harvested area: 83.119m acres, -377,000 acres, (-412,000 acres)
Yield: 171.8 bushels per acre, +1.9 bushels per acre, (+1.7 bushels per acre)
Production: 14.280bn bushels, +96m bushels, (+76m bushels)
Year-end stocks: 2.340bn bushels, +5m bushels, (+51m bushels)
World year-end stocks: 200.96m tonnes, -1.51m tonnes, (-950,000 tonnes)
Sources: USDA, Reuters, Agrimoney.com
Indeed, the corn area downgrade was larger than that
expected by investors, but was more than offset in production terms by a
bigger-than-forecast yield upgrade, by 1.9 bushels per acre to 171.8 bushels
per acre, the second largest result on record.
Still, upgrades to estimates for US feed and industrial use
of the grain limited the increase in the US stocks forecast for the end of
The USDA cut its forecast for global stocks of corn, citing
reductions to estimates for countries such as China and Mexico.
'Second highest supplies
For wheat, the USDA made an unexpectedly large increase to
its forecast for domestic stocks at the close of 2017-18, raising the figure by
27m bushels to 960m bushels, reflecting reduced expectations of use of the
grain in livestock feed.
Wheat stocks estimates, end 2017-18, change on previous and (on market forecast)
US: 960m bushels, +27m bushels, (+14m bushels)
World: 268.13m tonnes, +4.99m tonnes, (+5.33m tonnes)
Sources: USDA, Reuters, Agrimoney.com
Inventory data released late last month "indicated
lower-than-expected June-August disappearance", the USDA said.
"Additionally, projected 2017-18 US corn supplies are the
second highest on record, which is expected to dampen wheat feed and residual
use for the rest of" this season.
Meanwhile, the forecast for world wheat inventories at the
end of 2017-18 was handed a large and unexpected upgrade, reflecting higher
figures for a number of origins besides the US, and including Russia and the
The drought-hit Australian was downgraded by 1.0m tonnes to
a nine-year low of 21.5m tonnes.
A post-report rally in wheat futures fizzled out to leave
Chicago's December contract down 0.25 cents at $4.32 ¼ a bushel an hour after the
Wasde was published.