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Corn, soy, wheat prices plunge on buoyant US crop supply hopes

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Corn, soybean and wheat futures tumbled after US officials, in a much-anticipated briefing, pegged domestic supplies of all three crops above market expectations – with world wheat supplies supported too by a huge upgrade to Russia's harvest.

Corn futures for December tumbled 4.1% to $3.70 ½ a bushel in late deals in Chicago – their lowest level in 10 months.

Soybean futures for November stood down 3.4% at $9.39 ¾ a bushel, their weakest since late June.

Winter wheat futures for September slumped 3.8% to $4.42 ¾ a bushel in Chicago, setting a two month low.

On the Minneapolis exchange - which trades the spring wheat which has been particularly closely watched by investors thanks to dryness in major growing regions in the US and Canada – best-traded December futures stood down 3.4% at $7.20 ½ a bushel.

The declines followed crop estimates in the US Department of Agriculture's monthly Wasde report on world crop supplies and demand which reversed ideas of a drop in world soybean supplies in 2017-18, and lifted expectations for the rise in wheat inventories.

In corn, the estimate for US stocks at the close of 2017-18 was reduced, but by far less than investors had expected.

Corn resilience

Indeed, rather than cutting its estimate for the US corn yield by 2.5 bushels per acre, as investors had expected after a dry July for much of the Midwest, the USDA downgraded the forecast by a modest 1.2m bushels per acre, to 169.5 bushels per acre.

Wasde 2017-18 corn data, change on previous, and (on market forecast)

US yield: 169.5 bushels per acre, -1.2 bpa, (+3.3 bpa)

US production: 14.153bn bushels, -102m bushels, (+298m bushels)

US carryout stocks: 2.273bn bushels, -52m bushels, (+270m bushels)

World carryout stocks: 200.87m tonnes, +60,000 tonnes, (+5.96m tonnes)

Sources: USDA, Agrimoney.com, Reuters

While the yield reduction translated into a harvest downgrade of some 100m bushels, the cut was offset in part by a drop in expectations for corn exports and for domestic feed use of the grain.

Although the US corn inventory forecast for the close of 2017-18 was downgraded by 50m bushels to 2.27bn bushels, that was well above the 2.00bn-bushel figure the market had expected.

Surprise upgrade

For soybeans, the USDA actually increased its domestic yield estimate, by 1.4 bushels per acre to 49.4 bushels per acre, rather than cutting it to 47.5 bushels per acre as traders had forecast.

Wasde 2017-18 soy data, change on previous, and (on market forecast)

US yield: 49.4 bushels per acre, +1.4 bpa, (+1.9 bpa)

US production: 4.381bn bushels, +121m bushels, (+169m bushels)

US carryout stocks: 475m bushels, +15m bushels, (+51m bushels)

World carryout stocks: 97.78m tonnes, +4.25m tonnes, (+5.66m tonnes)

Sources: USDA, Agrimoney.com, Reuters

That was 50m bushels more than investors had expected.

The upgrade fuelled a 4.3m-tonne hike to 97.8m tonnes in the estimate for world soybean inventories at the close of 2017-18, well ahead of market forecasts.

'Outstanding conditions'

For wheat, meanwhile, although the estimate for US output in 2017-18 was cut by 21m bushels, that was less than 50m-bushel downgrade that the market had expected.

Wasde 2017-18 wheat data, change on previous, (on market forecast)

US all-wheat production: 1.739bn bushels , -21m bushels, (+18m bushels)

Includes winter wheat: 1.287bn bushels , +8m bushels, (+9m bushels)

Includes other spring wheat: 402m bushels , -21m bushels, (+9m bushels)

US carryout stocks: 933m bushels, -6m bushels, (+26m bushels)

World carryout stocks: 264.69m tonnes, +4.09m tonnes, (+8.0m tonnes)

Sources: USDA, Agrimoney.com, Reuters

And global supply prospects received a mammoth boost from a 5.5m-tonne hike to a record 77.5m tonnes in the forecast for Russian wheat output this year.

The USDA flagged official Russian reports of "high winter wheat yields in the Southern, North Caucasus, and Central Districts of Russia.

"In addition, satellite imagery indicates outstanding conditions and high potential yields in the country's spring wheat zone, including the Siberian, Ural, and Volga Districts."

'Pretty speechless'

The data were termed "bearish" by Futures International, which said that "US supply for 2017 for corn and soybeans surprised us in that yield estimates were well above trade expectations, resulting in large 2017-18 US stocks".

Benson Quinn Commodities also termed the data "bearish", while at Global Commodity Analytics, Mike Zuzolo said that "this report, if taken at face value, removes nearly all possibility of a pre-harvest rally.

"It is as negative for prices as July's [Wasde] report was. USDA repeated their assessment and doubled-down in big supplies. Period."

Mr Zuzolo - while saying he was "pretty speechless" over the corn and soy yield data, given the apparent threat to crops from weather and lower crop condition ratings - advised investors to "be ready to initiate increased soybean sales, based upon where we close today".

By Mike Verdin

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