For the second time in two weeks, important US crop data caught investors, as the expression goes, leaning the wrong way.

Funds had prepared for the US Department of Agriculture's monthly Wasde crop report by reducing hefty net long positions in corn and soybeans (and to a lesser extent wheat), depressing prices of the row crops well below summer record highs.

Some of the expectations being their positioning proved justified, including a larger-than-expected upgrade by the USDA to its estimate for the domestic soybean crop.

If the yield figure did not live up to the hopes of many investors, the extra 1.1m acres of the oilseed that was factored in, with spring sowings beating forecasts, certainly did.

'Bullish changes'

The trouble was that the USDA lifted its estimate for consumption sharply too – an upgrade which could hardly be called rash when the country has, a little over one month into 2012-13, already received orders covering more than 80% of soybean shipments it is expecting for the full year.

"While we do not expect this report to push Chicago soybean price to new highs, we do view it as confirmation of a still-very-tight supply situation."

Chicago soybeans for November indeed closed higher, up 1.7% at \$15.48 ½ a bushel, if well off their high of \$15.68 a bushel.

Notably, the rise also took the lot back above its 100-day moving average, leaving at only one night its sojurn below the line, and eroding a negative technical signal.

Corn stocks shrink

If funds were looking for any succour from corn, here they had even less luck.

The USDA downgraded its estimate for year-end stocks of the grain even thinner than the market had thought, to 618m bushels.

While the harvest was put just above market consensus, the USDA baulked at cutting its estimate for domestic feed use of corn, already at a 35-year low, if cutting its forecast for exports to a 38-year low.

And even this balance sheet included a figure for abandonment of acres to drought at less than 10%, a proportion many analysts questioned given a crop tested by the worst US drought since 1956.

"This is not down even one percentage point from the number of a year ago," Darrell Holaday at Country Futures said.

'Corn has retaken the reins'

So the report was termed "bullish" for corn among all the brokers Agrimoney.com was in contact with, and as highlighted by a 4.9% leap to \$7.73 ¼ a bushel in the price of Chicago's December contract.

"Corn has retaken the reins and is upside leader of the ag complex as the market needs to do a lot of demand rationing over the next 11 months," Benson Quinn Commodities said.

That said, Societe Generale, which has been one of the more bearish commentators on grains, was less upbeat, saying that "we would be cautious going forward given the demand destruction seen thus far".

"While farmers can be expected to sell any rallies, we remain mindful of the \$7.50-8.50 a bushel futures prices that led to demand destruction" over the summer, the bank said.

Bearish traction points

Wheat was bears' best bet for traction, with the Wasde being given a mixed review by commentators in terms of likely price impact.

The beef was in essence that the USDA left its estimate for US stocks at the close of 2012-13 above market expectations, reflecting a cut to export expectations.

And, as an extra pressure on prices, Ukraine announced that it had raised its wheat export cap by 1.0m tonnes to 5.0m tonnes, resolving, for now, the tension identified by UkrAgroConsult earlier in the week.

And the outlook for the US weather turned wetter for hard red winter wheat areas which need moisture to promote seedling development, which has got off to a tardy start.

'Fresh wheat tender activity'

But supporting prices were a cut to the US estimate for world inventories, which many analysts believe stands to get bigger still given that it factors in a 23.0m-tonne Australian crop which is a more optimistic guess than those from most other commentators.

Furthermore, "fresh world wheat tender activity overnight offers support as well", Benson Quinn noted, with Indonesia and South Korean among buyers, and Jordan tendering.

And with corn moving higher, it was hard for wheat to flop.

Chicago's December lot ended up 1.7% at \$8.86 as bushel, with its Kansas peer soaring 2.3% to \$9.18 a bushel.

In Europe, Paris wheat for November added 0.9% to E263.50 a tonne, feeling some pressure from a stronger euro, while London wheat for November gained 1.3% to £202.00 a tonne.

'Confirms our bearish outlook'

Among soft commodities, the Wasde was not kind to cotton, raising the estimate for world production by 2.3m bales, thanks to ideas of better crops in China, India and Pakistan

Meanwhile, the estimate for Chinese consumption was cut by 2.0m bales as, in the USDA's words, "the high domestic support price continues to erode offtake".

The forecast for world stocks at the close of 2012-13 was raised to a record 79.1m bales, equivalent to nearly nine months' use, also the loosest supplies on record.

"The USDA confirms our bearish outlook for the current season, and that the market needs to signal to northern hemisphere growers to sharply reduce area for the 2013-14 crop," Rabobank said.

New York cotton for December dropped 1.9% to 70.71 cents a pound.

'Washout' talk

Nor, among crops not touched much by the Wasde, did raw sugar fare any better, despite positive comments from Macquarie, which forecast higher prices as Brazil mills turn more cane into ethanol rather than the sweetener.

Talk of "washouts", ie physical buyers walking away from orders, didn't help.

Nor did the move down by New York's benchmark March contract through a string of technical support levels, including 10-, 20- and 50-day moving averages.

Talk of producers keen to sell, "taken with the lack of end user demand coupled with rumours of physical washouts on recent business, the tone is getting determinedly bearish once more", Sucden Financial said.

The March lot tumbled 3.8% to 20.45 cents a pound.