Wheat futures tumbled despite the US estimating winter sowings at a 109-year low – with the extent of the drop falling short of investor expectations, and bigger-than-expected inventory data weighing on prices too.
The slew of US Department of Agriculture statistics were also viewed as bearish for corn futures, which set a contract low.
However, they helped pull soybean futures out of a decline, in cutting the estimate for the latest harvest, and forecasting a smaller inventory build than investors had pencilled in.
Chicago wheat futures for March tumbled 3.0% immediately after the USDA unveiled its data slew, before recovering some ground to stand at $4.24 ¼ a bushel, down 2.1% on the day.
The USDA estimated US winter wheat sowings for the 2018 harvest at 32.61m acres – a drop of 88,000 acres year on year, and the lowest figure since 1909.
But the plantings drop, which the USDA underlined was of “less than 1%”, was far less severe than the fall of more than 4% expected by investors.
Plantings of hard red winter wheat, traded as Kansas City wheat, fell by less than had been thought.
Area allocated to white winter wheat and to Chicago-traded soft red winter wheat actually rose.
The data were a “surprise”, said Terry Reilly at Futures International, adding that they were the “biggest shocker for these reports”, and noting in particular the rise in soft red winter wheat seedings, which is grown largely in Corn Belt states such as Illinois and Indiana.
“We were hearing a lot of wheat followed soybeans [after harvesting] rather quickly last fall,” Mr Reilly said.
Feed use downgrade, stocks upgrade
Separate, quarterly USDA data on domestic crop inventories were also viewed as negative for prices, in showing wheat stocks at 1.87bn bushels as of December 1, some 24m bushels ahead of expectations, and implying weaker-than-expected demand over the previous three months.
Indeed, citing the stocks data, the USDA cut its estimate for domestic feed use of wheat over 2017-18 to a seven-year low of 100m bushels.
And it raised by 29m bushels to 989m bushels its forecast for US wheat stocks at the close of the season, defying investor expectations of an unchanged figure.
For soybeans, the USDA also surprised investors – by cutting its estimate for the 2017-18 harvest by 33m bushels to 4.39m bushels, rather than enacting a small upgrade.
The downgrade reflected a cut of 0.4 bushels per acre, to 49.1 bushels per acre, in the yield estimate, taking it further below last season’s 52.0-bushels-per-acre record high.
The yield revision was “led by reductions for Kansas, North Dakota and South Dakota”, the USDA said.
Futures International’s Terry Reilly said that the smaller harvest number helped “explain the discrepancy” between the figure of 3.16bn bushels that the USDA reported for December 1 soybean inventories, and the reading 24m bushels higher than the trade had expected.
Export downgrade too
Despite the harvest downgrade, the USDA raised its forecast for US soybeans stocks at the close of 2017-18, citing a cut to expectations for exports – which are now seen falling year on year for the first time since the drought season of 2012-13.
“Soybean exports are reduced 65m bushels to 2.16bn, reflecting lagging sales commitments through December and increased competition with higher soybean production and export forecasts for Brazil,” the USDA said.
Still, the revised inventory figure, of 470m bushels, came in narrowly short of the figure that investors had expected, fostering some recovery in soybean futures.
Chicago’s March soybean contract stood at $9.53 ¾ a bushel in late deals, a rise of 0.4% on the day, and well ahead of the near-five-month low that the contract fell to moments before the USDA unveiled its data.
For corn, the USDA also raised its estimate for US inventories at the close of the season, by 40m bushels to 2.48bn bushels – contrasting with investor expectations for a small downgrade.
The revision reflected an upgrade to the forecast for the latest US harvest, by 26m bushels to 14.6bn bushels, supported by an increase to a record 176.6 bushels per acre in the yield estimate.
“Among the major producing states, yields are estimated to be record high in Illinois, Minnesota, and Ohio,” the USDA said.
Corn futures for March stood down 0.9% at $3.45 ½ a bushel in late deals in Chicago – a contract low.