Soybean futures rose temporarily back above $15 a bushel for the first
time in eight months after the US cut hopes for domestic supplies to the
tightest on record, in a report which also offered some support to corn prices.
Soybean futures for May delivery jumped 2.0% to $15.12 a
bushel in Chicago, the highest for a spot contract since July, after the US
Department of Agriculture surprised investors by reducing its estimate for domestic
stocks at the end of the season to 135m bushels (3.67m tonnes).
While only a small downgrade, of 10m bushels, from the previous
forecast, the inventory number was significant as, compared with demand, it matched
the lowest on record, the 4.0% set 50 years ago.
This so-called stocks-to-use ratio is a key metric for
pricing, reflecting the extent to which buyers' need to compete to secure
The USDA, in its monthly Wasde crop report, also downgraded
its forecast for the harvest in Brazil, the biggest rival exporter, by 1.0m tonnes
to 87.5m tonnes, "with a higher harvested area more than offset by lower yields".
The Wasde briefing also offered a potentially bullish datapoint
for corn investors, in cutting the estimate for domestic inventories at the
close of 2013-14 by 125m bushels to 1.33bn bushels.
Wasde soybean estimates, change on previous and (on market forecast)
US end stocks, 2013-14: 135m bushels, -10m bushels, (-4m bushels)
World end stocks, 2013-14: 69.42m tonnes, -1.22m tonnes, (-720,000 tonnes)
Argentine harvest, 2013-14: 54.0m tonnes, unchanged, (-150,000 tonnes)
Brazilian harvest, 2013-14: 87.5m tonnes, -1.0m tonnes, (+70,000 tonnes)
Although representing stocks still viewed as ample by
investors, the downgrade was larger than they had expected, and reflected a
125m-rise to the forecast for US exports, which have continued to surpass
expectations, in part thanks to the grain's relative cheapness compared with
"Continued strong export sales and a rising weekly shipment
pace for US corn during March support the higher expected export level, as does
an increase in projected global corn demand," the USDA said.
The estimate for world corn demand was raised by 6.6m tonnes
to 950.3m tonnes, also enough to mop up increased export expectations for Russia,
South Africa and Ukraine.
However, the Wasde was less supportive to wheat prices,
raising the estimate for world inventories by 2.9m tonnes to 186.7m tonnes,
more than the market had expected.
Wasde corn estimates, change on previous and (on market forecast)
US end stocks, 2013-14: 1.331bn bushels, -125m bushels, (-72m bushels)
World end stocks, 2013-14: 158.47m tonnes, -470,000 tonnes, (+280,000 tonnes)
Argentine harvest, 2013-14: 24.0m tonnes, unchanged, (+50,000 tonnes)
Brazilian harvest, 2013-14: 72.0m tonnes, +2.0m tonnes, (+2.34m tonnes)
The upgrade reflected a lower estimate for feed use of wheat
in the US and, in particular, China, where output in the poultry sector, a big
user of the grain, has been curtailed by the impact of the bird flu epidemic in
Chicago wheat futures for May stood 1.5% lower at $6.71 a
bushel with 45 minutes of trading to go, while corn for May was down 0.5% at
$5.04 ¼ a bushel.
May corn futures initially rose 1.0% to $5.19 a bushel, a
seven-month high for a spot contract, before retreating on a decline attributed
to profit-taking, as well as to some disappointment that the USDA had not
raised hopes for demand for the grain by ethanol plants and livestock producers
Corn vs wheat
"All the change was within the exports," said Steve Kahler,
chief operating officer at Teucrium Trading, an issuer of exchange traded commodity
Wasde wheat estimates, change on previous and (on market forecast)
US end stocks, 2013-14: 583m bushels, +25m bushels, (no difference)
World end stocks, 2013-14: 186.68m tonnes, +2.87m tonnes, (+3.03m tonnes)
"Both ethanol production margins and livestock production
margins are still very strong, but the USDA chose to leave numbers on both of
Investors were disappointed that "there was a notable reduction
in wheat feeding, but the USDA did not offset with higher corn feeding".
On ethanol production Rich Nelson, chief strategist at Chicago
broker Allendale, said that the USDA "has been resistant against changing its
whole-year estimate" until the Environmental Protection Agency issues long-awaited
revisions to mandated biofuel consumption levels.
'Cargoes from South
The soybean revisions factored in an upgrade of 50m bushels
to a record 1.58bn bushels (43.0m tonnes) in the forecast for US exports in
2013-14, after a much-expected wave of cancellations of orders last month
failed to appear.
"US exports have remained strong, especially to China, where
imports from the US have already exceeded the previous marketing-year record,"
the USDA said.
The estimate for US soybean imports was raised by 30m
bushels to an all-time high of 60m bushels, a revision Mr Nelson termed "very
reasonable considering the widely-reported cargoes from South America that are
landing on our shores".
The first of what are expected to be a series of soybean cargos
from Brazil is rumoured to have arrived in the US on Monday.