Corn futures recovered, after the US made a deeper-than-expected cut to its estimate for domestic stocks, citing increased use of the grain in making ethanol.
But soybean and wheat futures fared less well, with the estimate revisions, made in the US Department of Agriculture’s much-watched Wasde crop report, bringing downgrades to expectations for US exports of both crops.
Chicago wheat futures for March, which had stood marginally higher ahead of the briefing, retreated to stand unchanged at $4.13 ½ a bushel in the aftermath, while soybean futures remained marginally in negative territory, at $9.80 a bushel.
Corn futures for March, however, rose as high as $3.52 ¾ a bushel after the briefing, a gain of 1.1% on the day.
The headway reflected a downgrade of 50m bushels to 2.44bn bushels (61.9m tonnes) in the USDA’s forecast for US corn inventories at the close of 2017-18.
Investors had expected a more modest downgrade, of 9m bushels.
But the USDA raised by 50m bushels, to 5.525bn bushels, the forecast for use of corn in making bioethanol.
The revision follows a weekly US data series of record highs for ethanol production, with the latest data, for the week to December 1, showing an all-time high of 1.10m barrels a day.
Corn vs sorhghum
However, the USDA in its upgrade stressed reduced competition to corn from sorghum at biofuel plants, rather than the absolute level of US ethanol production.
Supplies of sorghum, another major feedstock for ethanol producers, have been undermined by strong exports to China.
The USDA in the Wasde said that “corn used to produce ethanol is raised… based on increased sorghum export commitments, and the most recent data… estimated a lower-than-expected amount of sorghum used to produce ethanol during October”.
Indeed, for sorghum, the USDA halved to 50m bushels its estimate for use by biofuel plants over 2017-18, while raising its export forecast by 50m bushels to 260m bushels.
‘Heightened Canadian competition’
For wheat, by contrast, the USDA lifted its forecast for domestic inventories at the end of 2017-18 by 25m bushels to 960m bushels (26.1m tonnes), citing lowered export expectations.
“This reduction is primarily attributed to heightened Canadian competition expected from its increased exportable supplies,” officials said, after Canada last week upgraded its own estimate for its domestic harvest this year.
“Canada and the US compete in several of the same markets in Latin America and East Asia.”
The forecast for Russian shipments was also upgraded, by 500,000 tonnes to a record 33.5m tonnes, extending the country’s lead at the top of the global export table.
Rivalry with South America
For soybeans, the estimate for US stocks at the close of this season was lifted by 20m bushels to 445m bushels (12,1m tonnes), a slightly bigger upgrade than investors had expected, and also reflecting an export downgrade.
“Soybean exports are reduced 25m bushels to 2.225bn (60.6m tonnes) on stronger-than-expected competition from Argentina and Brazil during the first quarter of the marketing year,” the September-to-November period, the USDA said.
The forecast for Argentine exports was lifted by 500,000 tonnes to 8.5m tonnes, and for Brazil’s shipments by 500,000 tonnes to 65.5m tonnes, also extending the country’s advantage as the world’s biggest shipper.