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Corn futures revive, after bigger-than-expected US yield cut


Corn futures rebounded after the US cut its estimate for this year’s harvest yield by more than investors had expected, in a briefing which also cut the wheat production estimate thanks to spring crop setbacks.


Chicago corn futures for December, which had stood marginally lower before the US Department of Agriculture unveiled its monthly flagship Wasde briefing, soared to a gain of 2.3% in the immediate aftermath.


The contract stood at $3.79 ¾ a bushel 45 minutes after the report, a gain of 1.2% on the day.


The headway followed a Wasde report which did, after all, cut the forecast for US corn stocks at the close of 2019-20, by 19m bushels to a four-year low of 1.91bn bushels.


While market polls at the start of the week had suggested that investors expected a corn inventory downgrade, doubts had grown since thanks to US export weakness, and some talk of better-than-expected harvest yields.


‘Slow pace of early-season shipments’

In fact, the USDA did cut its forecast for US corn exports this season by a further 50m bushels to 1.85bn bushels, relegating the number to the lowest since 2012-13, when severe drought caused a massive loss in production.


The USDA flagged the “slow pace of early-season sales and shipments”, noting that over the past month “US bids have grown $6 per tonne to $174 reflecting continued supply uncertainty from harvest weather”.


Brazilian corn prices, while “supported by strong foreign demand”, were seen up a more modest $4 a tonne at $172 a tonne, with Black Sea offers up $2 a tonne to $166 a tonne.


Argentine corn offers, up $13 a tonne, did rise relatively strongly “on speculation about potential policy changes under the newly elected government”, but remained competitive, at $165 a tonne.


‘Supportive feed grains’

However, the US corn yield forecast was cut too, by 1.4 bushels per acre to 167.0 bushels per acre, a downgrade 0.5 bushels-per-acre larger than investors had expected.


The USDA cited a lower population of ears per acre in the crop than previously suggested, with some investors suggesting that this could be a harbinger of further downgrades.


“I’d expect the trade would start to assume another yield cut is now in the works,” said Mike Zuzolo at Global Commodity Analytics, forecasting the yield at 165 bushels per acre.


He termed the Wasde “supportive feed grains” in price terms.


‘Significant number of unharvested acres’

In fact, the report also lowered the figure for US wheat production by 42m bushels to 1.92m bushels, on a reduced area estimate.


However, this reflected in the main a reduction to the estimate for output of hard red spring wheat, a high protein variety, although the harvest-time inundations behind the area downgrade have also provoked ideas of a weak quality crop.


A resurvey of producers in late October, with harvest essentially over, revealed “a significant number of unharvested acres” of spring wheat in Idaho, Minnesota, Montana, North Dakota, South Dakota, and Washington.


‘Difficulties completing harvest’

The US hard red spring wheat harvest this year was downgraded by 37m bushels to 522m bushels.


“Due to late season precipitation and a mid-October snow, producers in Montana and North Dakota reported difficulties completing harvest activities and noted quality concerns,” the USDA said.


Minneapolis spring wheat futures for December stood up 0.4% at $5.21 a bushel, although having earlier touched $5.26 a bushel.


However, the gains did not spread to Chicago soft red winter wheat, which for December stood down 0.5% at $5.09 ¾ a bushel.


Crush hopes crimped

Soybean futures for January traded lower too, by 1.0% at $9.27 ¼ a bushel, with the Wasde adding to pressure on values from concerns on China-US trade accord, after US President Donald Trump denied reports that both countries had agreed to roll back import tariffs on each others’ goods.


In the Wasde, the USDA held its forecast for the US yield, rather than cutting it as investors had expected.


“Pod counts were slightly less than in October but pods gained weight,” Benson Quinn Commodities noted.


Meanwhile, the forecast for the US soybean crush in 2019-20 was downgraded by 15m bushels to 2.11bn bushels, on a “lower-than-expected early season” performance and “reduced soymeal export prospects”.


The revision fed through into an unexpected upgrade, of 15m bushels to 475m bushels in the forecast for US soybean stocks at the close of 2019-20.

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