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Corn futures tumble, after US makes surprise yield upgrade


Corn futures tumbled, after the US unexpectedly raised its yield forecast for this year’s crop, but soybean prices gained, with the estimate for output of the oilseed cut by more than investors had expected.


Chicago corn futures for December, which had stood a little lower ahead of the US Department of Agriculture’s Wasde crop briefing, extended those losses sharply afterwards, chalking up a 3.7% loss at one stage.


The contract, one hour after the report, stood at $3.81 ½ a bushel, a drop of 3.2% on the day.


The declines reflected a surprise upgrade in the Wasde to the USDA’s forecast for the domestic corn yield this year, by 0.2 bushels per acre to 168.4 bushels per acre, while lowering expectations for consumption of the grain.


‘Smaller supplies’

The yield upgrade, which took the figure 0.9 bushels per acre above that investors had expected, reflected a small increase to expectations for ear weight, which more than offset a decline in the forecast ears per acre.


Coupled with a smaller-than-forecast downgrade to the harvest area figure, the USDA pegged the US corn harvest this year at 13.78bn bushels – 95m bushels above market estimates, albeit representing a downgrade of 20m bushels month on month.


The report also lowered the forecast for US corn exports in 2019-20 by 150m bushels to a four-year low of 1.90m bushels, “reflecting smaller supplies and US price competitiveness.


Over the last month, US export bids “have increased $12 a tonne to $168 reflecting unfavourable weather during the early harvest period,” the USDA said, foreseeing its values as “not competitive”.


Furthermore, officials lowered expectations for domestic ethanol use of the grain, “based on weekly production data… during September”, which showed a sharp drop in production of the biofuel.


‘Be careful of being too negative’

The revisions ameliorated the impact of the sharply-reduced number for US carry-in corn stocks to 2019-20, as confirmed by separate data two weeks ago, to leave inventories at the close of the season pegged at 1.93bn bushels (49.0m tonnes).


Although a four-year low, that figure was 145m bushels above market forecasts.


The report was termed “bearish” by Benson Quinn Commodities, although at Global Commodity Analytics, Mike Zuzolo said that “we can’t argue with” the downgrade to shipment expectations “given the recent export pace and trend of poor corn exports”.


However, looking also at world data, he also advised investors to “be careful of being too negative the corn.


“Globally, we lost a big amount of ending stocks without cutting demand too much.”


The global stocks-to-use ratio for corn, at 26.9%, actually tightened 0.2 points month on month.



For soybeans, by contrast, the USDA made a bigger-than-expected downgrade to expectations for inventories at the close of 2019-20, slashing the figure by 180m bushels to 460m bushels.


The revision reflected in part a 1.0 bushel-per-acre cut to the US yield forecast, larger than investors had pencilled in, with the area estimate lowered too, while the figure for US crushing nudged higher too.


On exports, while the 2019-20 estimate was held, the USDA noted that Brazil soybean prices, which it pegged at $362 a tonne in the port of Paranagua, “are averaging 8% above US prices,” which it put at $336 a tonne in the Gulf.


The data were termed “bullish” by Benson Quinn Commodities, while Mr Zuzolo flagged “very strong US soybean exports”, with prospects only enhanced “if a US-China trade deal can be struck and USMCA [the Nafta replacement deal] can get past the House of Representatives”.


Soybean futures for November jumped 1.5% immediately after the briefing to $9.34 a bushel, the highest for a spot contract in 16 months, before easing back to $9.28 ½ a bushel, up 0.5% on the day.


Wheat stocks

For wheat, Chicago prices stood down 2.0% at $4.90 ¼ a bushel for December, weighed by rival grain corn, but also by an unexpected upgrade in the Wasde to the forecast for domestic inventories at the close of 2019-20.


The USDA raised the stocks figure by 29m bushels to 1.04bn bushels, on reduced demand hopes. saying that official data suggested that feed use of the grain in the June-to-August period was “similar to last year”.


Some investors have expected weak wheat prices, compared with corn, to foster an increase in consumption in feed rations.


Export competition

The US wheat export forecast was lowered too, with the USDA citing “reduced competitiveness [of US supplies] in international markets.


Over the past month, “prices for most classes of US wheat rose based on adverse weather in spring wheat growing areas and spillover support from corn and soy markets”.


A rise of $13 a tonne in Gulf prices of hard red winter wheat to $209 a tonne, had put values further out of contention with those from the Black Sea, up $2 at $290 a tonne, and French, up $4 a tonne at $188 a tonne in Rouen.


Indeed, most of the export downgrade attributed to hard red winter wheat, for which 2019-20 shipment expectations were cut by 15m bushels to 380m bushels.


Kansas City hard red winter wheat futures for December slumped by 2.6% to $4.02 ½ a bushel.

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