Corn prices soared, dragging wheat higher too, after the US cut its forecast for the 2019 harvest by more than investors had expected, putting carryout stocks on course for a six-year low.
Chicago corn futures for July, having stood little changed ahead of the US Department of Agriculture’s monthly Wasde crop briefing, jumped 2.8% in immediate deals afterwards.
The surge followed a 1.35bn bushel cut in the Wasde to a four-year low of 13.68bn bushels (347.5m tonnes) in the USDA’s forecast for the domestic 2019-20 corn harvest.
That was a downgrade far more severe than expected by investors, who had braced for a 14.25bn-bushel figure, with the revisions deemed “supportive” to corn prices by Benson Quinn Commodities.
‘Unprecedented planting delays’
The harvest downgrade reflected in part a cut to the US area estimate - as Robert Johansson, the USDA chief economist, had earlier in comments to the International Grains Council conference said was in the offing, following a dismal spring for plantings – with the sowings figure cut by 3.0m acres to 89.8m acres.
The yield forecast was also cut, by 10.0 bushels per acre to 166.0 bushels per acre.
“Unprecedented planting delays observed through early June are expected to prevent some plantings and reduce yield prospects,” the USDA said.
The revisions fed through into an 810m-bushel cut to a six-year low of 1.675bn bushels (42.56m tonnes) in the forecast for US corn stocks as of the close of 2019-20.
The USDA also, as Mr Johansson had signalled, raised its forecast for US farmgate corn prices in 2019-20, by $0.50 per bushel to $3.80 per bushel, a six-year high.
“Both the US corn yield and planted area missed trade expectations by a large amount, resulting in higher corn prices” in Chicago, said Terry Reilly at broker Futures International.
And Chicago wheat futures jumped too, adding 2.2% to $5.18 ½ a bushel in early deals after the Wasde, which cut the official forecast for US inventories at the close of 2019-20 by 69m bushels to a four-year low of 1.072bn bushels (29.16m tonnes).
While the USDA nudged higher its forecast for the domestic harvest this year, by 6m bushels to 1.90bn bushels, the revision was more than offset by an adjustment to carry-in stocks, and ideas of weaker corn supplies spreading feed demand to wheat.
The USDA said it raised its forecast for feed demand for wheat by “50m bushels to 140m on reduced projected corn supplies”.
It added that it had raised the forecast for US farmgate wheat prices in 2019-20 by $0.40 per bushel to $5.10 per bushel, on “sharply higher wheat futures prices and reduced… corn supplies”.
While soybean futures gained some pull from higher grain prices, they underperformed their corn and wheat peers, standing up 0.3% at $8.61 ¼ a bushel for July in late deals.
The USDA, in the Wasde, raised by 85m bushels to 1.05bn bushels its forecast for US soybean stocks at the close of 2019-20, starting in September – which in the main reflected an increased estimate for inventories at the end of this season.
The estimate for US soybean exports in 2018-19 was cut by 75m bushels to a five-year low of 1.70bn bushels (46.27m tonnes), “on lower-than-expected shipments in May and a lower import forecast for China”.
The China import forecast for 2018-19 was cut by 1.0m tonnes to 85.0m tonnes.
‘May have their day’
The USDA acknowledged that in the US, “adverse weather has significantly slowed soybean planting progress this year”, as it has for corn.
However, “area and production forecasts are unchanged with several weeks remaining in the planting season”.
However, at Futures International, Terry Reilly flagged the potential for a downgrade ahead to US soybean output expectations, saying that “we think USDA will make appropriate changes to the US soybean balance sheet… next month”, incorporating results of an acreage report due later this month.
Soybean futures “may have their day next month”.