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Soybean futures jump as US yield downgrade enhances stocks decline

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Soybean futures soared above $10 a bushel for the first time since before the China-US trade war, boosted by a larger-than-expected cut to US supply data, in a key report which was viewed less bullishly for grains.

 

Chicago soybean futures for September jumped 2.7% to $10.11 ¼ a bushel, the highest for a spot contract since June 2018.

 

The better-traded November contract flew 2.0% to $9.97 a bushel, the highest for a nearest-but-one contract for the same period.

 

The gains followed the release by the US Department of Agriculture of its benchmark Wasde crop report, which slashed by 150m bushels to a three-year low of 460m bushels the forecast for US soybean inventories at the close of 2020-21, a bigger downgrade than investors had expected.

 

Yield downgrade

The revision reflected in the main a downgrade of 1.4 bushels per acre to 51.9 bushels per acre in the estimate for the US soybean yield this year, a cut in line with investor expectations, reflecting a dent to crop condition from dryness, and from last month’s derecho storm in parts of the Corn Belt.

 

“During the month of August, 13 of the 18 estimating states published in the weekly Crop Progress and Condition report showed a decrease in the percent of the acreage rated in the good to excellent categories,” officials noted.

 

However, the USDA lowered too its estimate for US inventories at the end of 2019-20, last month, saying that demand for soybeans from both exporters and the domestic crushers last season had proven stronger than had been thought.

 

The USDA raised by $0.90 per bushel to $9.25 a bushel its forecast for US farmgate soybean prices for 2020-21 – lifting it from a 14-year low to a three-year high.

 

Ethanol setback

For corn, the USDA raised its US farmgate price forecast too, by $0.40 a bushel to $3.50 a bushel, although this would still represent a three-year low, and came amid data less well received by investors.

 

Corn futures for December, having stood higher ahead of the Wasde, stood down 0.1% at $3.64 ¾ a bushel in the aftermath.

 

While the USDA cut its forecast for US corn inventories at the close of 2020-21 by 253m bushels to 2.50bn bushels, the downgrade fell some 50m bushels shy of the level investors had expected.

 

Although the USDA lowered its forecast for the US harvest in line with forecasts, the impact was offset in part by a cut to expectations for the amount of corn used in making ethanol this season, “based on the continued slow recovery in motor gasoline demand as a result of Covid-19”, officials said.

 

‘Remarkable turnaround’

However, wheat of Chicago’s big three contracts came out worst from the Wasde, extending losses to stand down 1.3% at $5.41 a bushel in late trading, for December delivery.

 

The Wasde – rather than cutting the forecast for world wheat stocks at the end of 2020-21, as investors had expected – raised its estimate by 2.6m tonnes to 319.4m tonnes, “a new record”.

 

The revision reflected increased forecasts for Australian and Canadian harvests, which more than offset a cut of 1.0m tonnes to 19.5m tonnes in the estimate for Argentine production.

 

“Wheat production in New South Wales is the major driver for Australia’s remarkable turnaround this season,” the USDA said, while for saying for Canada, analysis of satellite data “indicates above-average plant health and yield potential for crops in Alberta and Saskatchewan”.

 

The downgrade to Argentina’s crop, by contrast, was down to “dryness, particularly in the province of Córdoba.

 

“Soil moisture reserves are currently insufficient in many areas to provide the moisture needed for normal development.”

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