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Volatility swamps soybean futures, after US hikes stocks forecast

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Soybean futures flew into volatility as the US forecast its exports of the oilseed falling at the fastest in six years, despite weakened expectations for Argentina’s harvest, amid revisions which hit wheat prices too.

 

Soybean futures for March, which had posted modest gains ahead of the US Department of Agriculture’s monthly Wasde crop report, swung in and out of negative territory after the briefing raised the estimate for US stocks at the close of 2017-18 by far more than investors had expected.

 

The USDA pegged domestic soybean carryout inventories at an 11-year high of 530m bushels (14.42m tonnes), an upgrade of 60m bushels from last month’s forecast, and well ahead of the 486m-bushel figure that the market had pencilled in.

 

The upgrade reflected a downgrade of 60m bushels to 2.10bn bushels (57.15m tonnes) in the forecast for US soybean exports in 2017-18, on a September-to-August basis – a fall which would represent the biggest since that in 2011-12.

 

’Increased competition’

 

The downgrade reflected the pace of US soybean “shipments and sales through January and increased export competition on larger supplies in Brazil”, the USDA said.

 

Indeed, the USDA raised by 2.0m tonnes to 69.0m tonnes its forecast for Brazilian soybean shipments in 2017-18, enhancing nearly to 12m tonnes the world export leadership of the South American country, up from 470,000 tonnes three years ago.

 

The USDA flagged for Brazil “record trade to date” and improved hopes for the newly-started soybean harvest, which was also upgraded by 2.0m tonnes to 112.0m tonnes “as favourable weather throughout the growing season has raised yield prospects”.

 

By contrast, the Argentine soybean crop was downgrade by 2.0m tonnes to 54.0m tonnes, “on lower harvested area and reduced yields resulting from periods of unseasonable warmth and dryness”.

 

‘Record trade’

 

The downgrade reflected the pace of US soybean “shipments and sales through January and increased export competition on larger supplies in Brazil”, the USDA said.

 

Indeed, the USDA raised by 2.0m tonnes to 69.0m tonnes its forecast for Brazilian soybean shipments in 2017-18, enhancing nearly to 12m tonnes the world export leadership of the South American country, up from 470,000 tonnes three years ago.

 

The USDA flagged for Brazil “record trade to date” and improved hopes for the newly-started soybean harvest, which was also upgraded by 2.0m tonnes to 112.0m tonnes “as favourable weather throughout the growing season has raised yield prospects”.

 

By contrast, the Argentine soybean crop was downgrade by 2.0m tonnes to 54.0m tonnes, “on lower harvested area and reduced yields resulting from periods of unseasonable warmth and dryness”.

 

‘Less competitive globally’

 

Wheat futures set a more definite course lower, standing 0.9% down at $4.56 ¼ a bushel an hour after the release of the Wasde, which raised the estimate for US stocks of the grain at the close of 2017-18, on a June-to-May basis, by 20m bushels to 1.01bn bushels (27.5m tonnes).

 

Again, the revision reflected weakened US export hopes, with the USDA flagging that the dent to competitiveness from a rise in wheat prices “on concerns over drought conditions in hard red winter wheat areas”, in particular the southern Plains.

 

“These strengthening prices make US wheat less competitive globally in light of abundant competitor supplies.

 

“Russia, with a record crop, is now forecast to be the world’s number one exporter,” with the USDA raising its forecast for Russia’s exports this season again, by 1.0m tonnes to 36.90m tonnes.

 

Furthermore, it noted that “low-price Argentine supplies are challenging US exports” in Brazil and other markets, “particularly sub-Saharan Africa and South East Asia”, with the forecast for Argentine wheat exports lifted by 600,000 tonnes to 12.5m tonnes.

 

‘Brisk sales’

 

Corn futures, meanwhile, hung on to modest gains, adding 0.1% to $3.65 ¾ a bushel for March delivery, after the USDA cut its forecast for domestic inventories of the grain at the close of this season by 125m bushels to 2.35bn bushels.

 

The downgrade, far bigger than 9m-bushel cut that investors had expected, reflected an enhanced outlook for US exports this time, now seen falling by less than 250m bushels from last season’s nine-year high.

 

“Sales and shipments of US corn have been brisk in recent weeks as foreign buyers turn to the US.

 

“With successive bumper crops, the US has abundant exportable supplies and prices are expected to remain competitive on an FOB basis until Brazil’s second crop comes onto the market,” the USDA added, pegging US prices steady at $165 a tonne, $2-10 a tonne below rising South American and Black Sea offers.

 

The forecast for Argentine exports was cut by 1.5m tonnes to 27.5m tonnes, reflecting a 3.0m-tonne downgrade to harvest expectations after “persistent heat and dryness during January and early February reduced yield prospects for early-planted corn in key central growing areas”.

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