PRINTABLE VERSION   EMAIL TO A FRIEND   RSS FEEDS 17:55 UK, 12th Aug 2014, by Agrimoney.com
US ups corn yield hopes, but by less than forecast

Corn prices pared losses after the US raised its estimate for its harvest of the grain by far less than investors had expected, although a bigger-than-expected increase in the soybean supply forecast hurt prices of the oilseed.

Chicago corn futures for December, the best-traded lot, stood at $3.66 a bushel in midday deals, down 0.6% on the day but well above a contract low of $3.62 a bushel reached earlier.

The performance followed a long-awaited revision by the US Department of Agriculture, in its monthly Wasde crop to report, which raised the forecast for the domestic corn yield by 2.1 bushels per acre to 167.4 bushels per acre.

While a record, the estimate was below the figure of 170.1 bushels per acre that investors had expected.

'Localised moisture issues'

The USDA highlighted "mostly favourable" conditions for US corn, and soybean, crops, with temperatures remaining low.

Wasde corn data, change on last and (on market forecast)

US yield: 167.4 bushels per acre, +2.1 bushels per acre, (-2.7 bushels per acre)

US ending stocks 2013-14: 1.181bn bushels, -65m bushels, (-5m bushels)

US ending stocks 2014-15: 1.808bn bushels, +7m bushels, (-197m bushels)

World ending stocks 2014-15: 187.82m tonnes, -23,000 tonnes, (-4.71m tonnes)

Sources: USDA, ThomsonReuters

"Reproductive to filling corn and soybeans were able to thrive, largely due to below-normal temperatures and a lack of heat stress, as well as the ability of crops to tap into soil moisture that had accumulated during June," USDA officials said.

However, they also noted a "July drying trend", and "localised moisture issues" which "caused a slight decline in condition towards the end of the month".

With estimates for corn consumption raised both for 2013-14, which ends this month, and 2014-15 - reflecting largely improved expectations for exports and demand for the grain for making ethanol - the estimate for US inventories at the close of next season was lifted by just 7m bushels.

At 1.808bn bushels, the revised stocks forecast was well below the figure of 2.01bn bushels that the market had expected.

'Minimal supply gains'

For soybeans, however, while the USDA also raised its estimate for the domestic yield by less than the 0.4 bushels per acre that investors had expected, it failed to lift ideas on consumption, as many commentators had forecast.

Wasde soybean data, change on last and (on market forecast)

US yield: 45.4 bushels per acre, +0.2 bushels per acre, (-0.2 bushels per acre)

US ending stocks 2013-14: 140m bushels, unchanged, (+4m bushels)

US ending stocks 2014-15: 430m bushels, +15m bushels, (+16m bushels)

World ending stocks 2014-15: 85.62m tonnes, +310,000 tonnes, (-280,000 tonnes)

Sources: USDA, ThomsonReuters

"With minimal supply gains, soybean exports and crush are unchanged," the USDA said.

The revisions left the estimate for inventories at the close of next season at an eight-year high of 430m bushels (11.7m tonnes), above the figure of 414m bushels that investors had expected.

Many commentators had forecast a pick-up in the pace of US exports, notably to China, to be reflected in a bigger estimate for US shipments in 2014-15.

'Very high yields'

The bigger-than-expected stocks forecast left November soybeans down 1.5% at $10.57 a bushel, a little below their level before the report.

Wasde wheat data, change on last and (on market forecast)

US harvest 2014: 2.030bn bushels, +38m bushels, (+20m bushels)

Includes hard red winter wheat output: 729m bushels, +26m bushels, (+22m bushels)

US ending stocks 2014-15: 663m bushels, +3m bushels, (in line)

World ending stocks 2014-15: 192.96m tonnes, +3.42m tonnes, (+2.55m tonnes)

Sources: USDA, ThomsonReuters

Wheat also struggled to recoup losses, standing 1.1% down at $5.40 a bushel, after the Wasde raised its estimate for world stocks at the close of 2014-15 to 193.0m tonnes, some 2.6m tonnes above market expectations.

The upgrade reflected a 6.0m-tonne hike to 59.0m tones in the estimate for Russia's harvest, and a 1.0m-tonne upgrade for Ukraine.

"The Russia and Ukraine increases are based on harvest reports that indicate very high winter wheat yields, especially for Russia," USDA officials said.

More upgrades ahead

Investors said that the inability of corn futures to head into positive territory - despite the figure for US stocks at the close of 2014-15 coming in nearly 200m bushels short of forecasts reflected ideas that Tuesday's yield figure was certain to be revised upwards further.

"Although it came in below the average guess, there is a widespread sentiment among market participants that subsequent yield surveys will find more bushels, based on heavy [corn] ear weights," CHS Hedging said.

The USDA, whose August Wasdes are the first to be based in part on field surveys, said that the ear counts it found on crops in 10 major producing states, including Illinois, Indiana and Iowa, were the "highest number on record".

At Roach Ag, Brian Roach said that "we go back to trading the final corn yield potential", which the broker says is, to judge by weather, condition ratings, far higher than the USDA's current estimate.

"There is a potential that the US corn yield could end up somewhere between 172-174 bushels per acre."

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