The US lifted its forecast for its corn harvest to an even larger record high than had been expected, although improved hopes for exports and feed use of the grain helped futures recover from contract lows.
The US Department of Agriculture, in its much-watched monthly Wasde briefing, lifted by 278m bushels to 15.3bn bushels its forecast for the domestic 2020-21 corn harvest, taking it above the 2106 figure to what would the biggest crop on record.
The upgrade, which was more than 100m bushels larger than investors had forecast, reflected a bigger-than-expected yield upgrade, of 3.3 bushels per acre to 181.8 bushels per acre, which would also be a record high, and was based, for the first time this season, on farner surveys.
“Illinois, Indiana, Iowa, Missouri, Nebraska, and Ohio are forecast to have yields above a year ago, with record-high yields expected for Minnesota and South Dakota,” the USDA said.
The USDA, factoring in the enhanced supply, cut its forecast for average farmgate US corn prices in 2020-21 by $0.25 a bushel to $3.10 a bushel, the lowest in 14 years.
And the initial reaction in the Chicago futures market was to cut the price of the best-traded new crop December corn lot to $3.20 a bushel, matching the contract low.
However, the price recovered to close at $3.27 ¼ a bushel, a 1.2% gain on the day, as investors factored in some upgrades to expectations for demand for the supplies.
The estimate for US feed use of corn in 2020-21 was raised by 75m bushels to 5.93bn bushels “based mostly on a larger crop and lower expected prices”, while the export forecast was upgraded byt 75m bushels to 2.23bn bushels “reflecting US export competitiveness and relatively low world market prices”.
The enhanced use ameliorated somewhat the upgrade to US corn stocks caused by the enhanced harvest estimate, with the carryout inventory figure of 2.76bn bushels (70.0m tonnes) – while a 23-year high – more than 40m bushels shy of market expectations.
Soybean futures recovered from early lows too, despite the USDA also raising its forecast for the oilseed by more than investors had expected – by 390m bushels to 4.43bn bushels, the second highest on record.
Again, the upgrade reflected a bigger-than-anticipated upgrade to the yield figure, of 3.5 bushels per acre to 53.3 bushels per acre, which would be an all-time high.
“If realised, the forecasted yield will be a record high in Illinois, Indiana, Kentucky, Michigan, Mississippi, Missouri, Nebraska, Ohio, and South Dakota,” the USDA said.
‘Increased crush demand’
The figure fed through into an estimate for US stocks at the close of 2020-21 of 610m bushels (16.6m tonnes), well above investors’ expectations of a 525m-bushel figure.
However, prices were supported by a world inventory forecast of 95.4m tonnes which came in some 2.5m tonnes short of market estimates.
The estimate for Chinese soybean imports in 2020-21 was lifted by 3.0m tonnes to a record 99.0m tonnes, on “increased crush demand and rising US supplies”.
Chicago November soybean futures ended 1.1% higher at $8.83 a bushel,
‘Set a bearish tone’
Wheat futures fared worst of Chicago’s big three contracts, declining 0.8% to $4.91 ¼ a bushel for September delivery, despite the Wasde showing a lower-than-expected estimate for US stocks at the close of 2020-21, of 925m bushels.
The forecast for world inventories, by contrast, was lifted by nearly 2.0m tonnes to 316.8m tonnes – some 3.0m tonnes ahead of market expectations – supported by enhanced expectations for Russian and Ukrainian harvests.
The Russia upgrade was “based on updated harvest results and government estimates”, the USDA said
The Wasde “set a bearish tone for wheat markets”, said CRM AgriCommodities.
Nonetheless, Kansas City hard red winter wheat futures for September revived to end 0.2% higher at $4.17 ¾ a bushel, helped by the class sustaining a 33m-bushel cut to 390m bushels in the estimate for US stocks at the close of 2020-21 - in contrast to increased expectations for hard red spring wheat stocks.
The US hard red winter wheat harvest was downgraded by 15m bushels to 695m bushels, with the export estimate increased by 20m bushels to 405m bushels.
US export sales “of this class have been robust”, the USDA said, noting support from relative price weakness.
Minneapolis spring wheat futures for September eased by 0.1% to $4.92 ¼ a bushel.