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Corn futures dive to contract low, after US ups yield estimate to record high

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Corn futures tumbled to a contract low after the US surprised investors by upgrading its estimate for this year’s domestic corn yield to record high, putting stocks on course for a 30-year high.

 

Corn futures for December, which had stood little changed ahead of the US Department of Agriculture estimates, tumbled to $3.40 3/4

a bushel in the aftermath, a low for the contract, before recovering a little ground to end at $3.41 1/2 a bushel, a drop of 1.9% on the day.

 

The slide followed the upgrade by the USDA, in its key month Wasde crop report, to estimates for US corn supplies, with stocks now seen ending 2017-18 at 2.49bn bushels (63.2m tonnes), their highest since 1987-88.

 

The revision was far larger than expected by investors, with some data on soybean and wheat supplies beating expectations too.

 

“All-in-all a bearish report,” said broker Benson Quinn Commodities.

 

‘Increased demand from Mexico’

 

The corn stocks upgrade reflected a hike of 3.6 bushels per acre to 175.4 bushels per acre in the forecast for the US corn yield this year.

 

That took the figure above last year’s record high, and well beyond market expectations too, while adding nearly 300m bushels to the harvest total.

 

Indeed, the forecast for carryout stocks from 2017-18 would have been larger still were it not for improved hopes for exports, including to Mexico, whose sorghum crop was downgraded by 1.4m tonnes to 4.6m tonnes.

 

The USDA flagged “expectations of improved US competitiveness, reduced exports for Ukraine,” where harvest results have fallen short of forecasts, “and increased demand from Mexico based on sharply lower sorghum production prospects”.

 

‘Bearish in our opinion’

 

For soybeans, the USDA trimmed its forecast for domestic production by 6m bushels to 4.43bn bushels, reflecting a “fractionally lower” yield figure.

 

Again, this production estimate exceeded investor expectations, and meant only a marginal drop in the estimate for soybean inventories at the close of 2017-18, a figure which Terry Reilly at Futures International termed “bearish in our opinion”.

 

Soybean futures for January, which had stood modestly lower ahead of the data, settled down 1.4% at $9.85 a bushel, with the extent of the loss seen reflecting the weakness in the corn market.

 

The USDA lifted by $0.10, to $9.30 a bushel at the midpoint of the estimate range, its outlook for US farmgate prices of soybeans this season.

 

‘Higher export projection’

 

The data for wheat were deemed by many investors as more positive for prices, with the USDA cutting its forecast for domestic stocks of the grain at the close of 2017-18 by 25m bushels to a three-year low of 935m bushels (25.5m tonnes).

 

The revision reflected an improved estimate for exports, upgraded by 25m bushels to 1.0bn bushels.

 

“Recent sales to Iraq support a higher export projection with hard red winter [wheat] accounting for the entire increase,” the USDA said.

 

While the forecast for world wheat stocks was downgraded by less than investors had expected, with estimates for inventories in the likes of Australia and the European Union upgraded, Chicago wheat futures sustained only limited losses.

 

Chicago’s December contract closed 0.5% higher at $4.29 a bushel.

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