Grain prices rode a rollercoaster ride after US officials,
unexpectedly, trimmed forecasts for domestic wheat stocks, in a report which cut
the estimate for soybean supplies nearly to the tightest on record.
Investors' initial reaction was to hand wheat prices gains
of 2.0% in Chicago after the US Department of Agriculture, in its much-watched
monthly Wasde crop report, reduced its forecast for stocks of the grain at the close
of 2012-13 – rather than raising the number, as analysts had expected.
USDA officials cut by 25m bushels to a four-year low of 691m
bushels their forecast for wheat inventories at the close of 2012-13, saying the
grain's diminished premium to corn had encouraged extra demand from livestock
"Feed and residual use is projected 25m bushels higher as
weaker cash prices relative to corn support opportunities for increased wheat
use in livestock and poultry rations," the USDA said.
However, half an hour after setting its day high, Chicago
wheat had collapsed back into negative territory, before advance and retreat saw it end up 0.25 cents a bushel - the minimum gain possible.
Closing Chicago crop prices
Rough rice: $16.345 per hundredweight, (+1.4%)
Oats: $3.85 ¾ a bushel, (+1.1%)
Wheat: $7.56 ¼ a bushel, (+0.25 cents)
Corn: $7.10 ¾ a bushel, (-0.2%)
Soybeans: $14.52 ½ a bushel, (-2.3%)
Prices for March contracts
Corn futures for March also swung in and out of negative
territory before closing with a small loss."The tighter stocks helped wheat, which in turn gave a leg
up to corn, whose stocks did not go up by as much as the latest whispering
campaign had suggested," Jerry Gidel, feed grains analyst at Chicago-based
broker Rice Dairy, said.
While the USDA raised its estimates for domestic corn
inventories at the close of 2012-13 by 30m bushels to 632m bushels, the drop in
prices of the grain already this week had been down to ideas of a bigger
'Real fear factor'
"But the world numbers did not do that much to offer
support," Mr Gidel said.
Wasde 2012-13 corn data, change on last and (on market forecast)
US year-end stocks: 632m bushels, +30m bushels, (+14m bushels)
World year-end stocks: 118.04m tonnes, +2.05m tonnes, (+2.55m tonnes)
Argentine output: 27.0m tonnes, -1.0m tonnes, (+739,000 tonnes)
Brazilian output: 72.50m tonnes, +1.5m tonnes, (+1.22m tonnes)
In wheat, the USDA raised its estimate for world supplies at
the end of the season, rather than cutting them as investors had expected, and made
a bigger-than-forecast upgrade to the corn number, reflecting improved ideas
for Brazilian and Mexican harvests.Investors were further reluctant to let rallies run by the prospect
of further key USDA reports later this month, with Monday bringing upgraded long-term
forecasts on world crops, and February 22 to bring the first full estimates for
the US harvests.
"That is the real fear factor," Mr Gidel said, with many
forecasters predicting a huge estimate for the US corn crop.
"That is the big bear in the room."
Soybean prices also temporarily showed small gains, before
retreating into negative territory, as traders balanced ideas of tight domestic
supplies against slightly loosened global ones.
Wasde 2012-13 soy data, change on last and (on market forecast)
US year-end stocks: 125m bushels, -10m bushels, (-4m bushels)
World year-end stocks: 60.12m tonnes, +660,000 tonnes, (+932,000 tonnes)
Argentine output: 53.0m tonnes, -1.0m tonnes, (-95,000 tonnes)
Brazilian output: 83.50m tonnes, +1.0m tonnes, (+855,000 tonnes)
The USDA raised its estimate for world stocks of the oilseed
by 660,000 tonnes to 60.1m tonnes, a little more than analysts had foreseen,
reflecting raised expectations for the Brazilian harvest.
Domestic stocks at season-end were downgraded by 10m bushels
(270,000 tonnes) to 125m bushels (3.4m tonnes), reflecting a more generous
estimate for demand from US crushing plants.
The revision reflected "larger soymeal exports and domestic
use" forecasts, the USDA said.
"Strong US soymeal exports during the first half of the
marketing year are partly offsetting declining shipments from Argentina where
crushing has slowed due to limited soybean supplies."
'The one to watch'
US soybean supplies are now on course to end the season at the
equivalent of less than 4.1% of use - equivalent to just less than 15 days'
Wasde 2012-13 wheat data, change on last and (on market forecast)
US year-end stocks: 691m bushels, -25m bushels, (-36m bushels)
World year-end stocks: 176.73m tonnes, +90,000 tonnes, (+1.21m tonnes)
This is the tightest figure since 1964-65, when inventories
dropped to 4.02% of consumption.
The soybean market "looks the one to watch", said Steve
Kahler, chief operating officer at Teucrium Trading, a New York-based provider
of commodity-based exchange traded products.
"China has been a consistent buyer, old crop and new. The
world is still buying, even at these price levels."