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|Corn leads grain markets lower, after surprise US yield upgrades
By Mike Verdin - Published 12/09/2017
Soybean and, especially, corn futures tumbled, although wheat prices revived, after the US surprised traders by raising its yield forecasts for both row crops, while cutting hopes for values farmers can expect.
Soybean futures for November, which had stood only marginally lower ahead of the US Department of Agriculture estimate revisions, tumbled 2.3% in the aftermath, to $9.37 ½ a bushel.
The drop reflected an upgrade in the USDA's forecast for the domestic soybean yield this year of 0.5 bushels per acre to 49.9 bushels per acre, rather than the 0.6 bushels-per-acre downgrade that investors had expected.
'Rains aided crops'
The USDA, while noting "pockets of Midwestern dryness", which had left "some late-developing summer crops in need of rain", flagged that "in portions of the Dakotas and environs, August rain aided previously drought-stressed crops such as corn and soybeans".
The soy harvest upgrade left the US on course for a record 4.38bn-bushel harvest.
The USDA also raised estimates for US soybean exports, reflecting improved expectations for China's imports for both 2016-17 and 2017-18 - upgraded by 1.0m tonnes to 92.0m tonnes and 95.0m tonnes respectively.
However, the improved production hopes dashed investor expectations of a cut to the estimate for US soybean stocks, a particularly important pricing metric.
Hit to ethanol exports
Corn futures for December plunged more than 3% to within 1.25 cents of a contract low after the USDA issued a double boost to inventory hopes.
Besides raising the yield forecast by 0.4 bushels per acre to 169.9 bushels per acre, the third largest on record, the USDA cut its estimate for consumption of US supplies, by 50m bushels.
The downgrade reflected in part a downgrade to expectations for use of the grain by ethanol plants, "based on observed usage during 2016-17 and expectations of lower exports" of the biofuel, following curbs on purchases by the likes of Brazil and China.
US corn stocks were seen ending 2017-18 at 2.34bn bushels – an upgrade of 62m bushels, rather than the 90m-bushel cut that investors had forecast.
"This month's 2017-18 US corn outlook is for increased production, greater feed and residual use, higher ending stocks, and lower prices," the USDA said.
Indeed, officials trimmed by $0.10 a bushel, to $2.80-3.60 a bushel, their forecast for the average price that farmers will receive in 2017-18.
Even at the mid-point, of $3.20 a bushel, that stands to be the weakest price in 11 years, with average values not slipping below $3.00 a bushel since 2005-06.
For soybeans, the price forecast was also trimmed by $0.10 at both ends of the range, to $8.35-10.05 a bushel.
At the mid-point, of $9.20 a bushel that implies farmers receiving the lowest price, bar one, of the past 10 years.
For wheat, the USDA left its forecast for domestic production and demand in 2017-18 unchanged, while cutting its estimate for world inventories by 1.55m tonnes to 263.1m tonnes, a bigger downgrade than investors had expected.
While the estimate for the Russian harvest was lifted again, this time to a record 81.0m tonnes, the upgrade was offset in part by reduced figures for Australian and European Union production.
The cut to stocks hopes was deemed by Benson Quinn Commodities as "nominally supportive" to wheat futures, which recovered from early losses, on spillover selling from corn and soybean markets, to stand flat at $4.34 ¾ a bushel.
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