Grain markets staggered under a “historic” upward revision of US harvest expectations on Wednesday, where markets had been expecting a sizable cut to hopes.
Corn and soy hit limit down, as the closely watched US Department of Agriculture supply and demand estimates came in much more bearish than the market expectations.
Richard Feltes of RJ O’Brien saw “history being written” in the gap between corn and soy numbers and reality.
The 2015 US corn crop was forecast at 13.686bn bushels, up 156m bushels from the USDA’s July forecast, where markets had expected a downward revision.
US corn yield were forecast above the highest trade expectations at 168.8 bushels an acre.
The USDA forecast corn supplies after harvest hitting a record 15.5bn bushels.
Expectations for the US soybean crop were also revised upward, by 39m bushels to 3.916bn bushels, where markets had expected a sharp downward revision.
The USDA was also downbeat on row crop demand, cutting expectations for US exports of corn citing “larger supplies in Brazil and Argentina [are] expected to increase competition for US corn in the world market”.
The USDA forecast a 100m-bushel drop in US soybean exports citing “slow export sales commitments” for new crop soybeans.
September soybeans futures hit limit down $9.11 a bushel, closing down 6.0% at $9.18 Ѕ a bushel. New crop November soybeans closed down 6.0% at $9/10 a bushel.
September corn futures hit limit down at $3.46 Ѕ a bushel, closing down 4.7% at $3.57 ј a bushel.
Market analysts saw these results pushing prices into a long-term bear market.
Darrell Holaday of Country Futures said it was easiest to “simply say these numbers are very bearish and if they become reality we are long-term looking at significantly lower prices”.
Weather lent no support to row crops either, as the forecast across the US Midwest Corn Belt turned wetter, promising some much needed moisture for soy and corn crops.
“A wetter shift in the pattern next week would help replenish soil moisture and would be favourable for corn and soy crops” said Kyle Tapley, of MDA Weather Services.
“Wheat numbers were generally neutral,” said Mr Holaday. “But neutral wheat numbers are not supportive.”
US wheat production was revised downward by 12m bushels to 2.136m bushels.
This was in line with analyst’s expectations, but wheat had little hope of finding strength amid a plummeting grain market.
There was also some bearish data on exports, which were lowered by 25m bushel to 850m bushels, as the USDA cited “excellent” prospects for wheat production in the former Soviet Union.
“Winter wheat production in Russia and Ukraine is better than expected, particularly considering last autumn’s drought,” the USDA said.
The USDA’s bearish outlook on FSU production was born out by other estimates on Wednesday.
The Russian agricultural consultancy SovEcon upgraded its forecast for Russia’s wheat crop in 2015 by 2m tonnes to 59.5m tonnes, as weather conditions in Siberia and Urals regions improved.
And the Kazakhstan agriculture ministry upgraded its estimates for 2015-16 grain experts by 1m tonnes to 8m tonnes.
September wheat closed down 2.6% at $4.92 ј a bushel.
Cotton futures jumped from a contract low to limit up after the US warned that field surveys had shown its harvest would fall far short of expectations, leaving growers also certain to receive a rise in prices this season.
The USDA revised its forecast for the US cotton harvest down by 1.42m bales to 13.08m bales where markets had expected an upward revision.
The downgrade was based on downward revisions to both planted area and yield following a crop survey.
Cotton yields were downgraded by 24 pounds per harvested acre to a four-year low of 795 pounds per acre.
And just as the upward revisions to grains sent them tumbling, cotton prices jumped on the news, from a contract low to limit up.
December New York cotton closed up 4.7% at 64.69 cents a pound.
China startles again
Meanwhile, there was bad news in macroeconomic markets as well today, as China startled markets with a second devaluation of theyuan.
China is the world’s biggest importer of commodities, and the news weighed across the complex.
But the blow to prices was softened by the dollar, which was dragged downward by the falling yuan amid fears of a global slowdown, and its potential to delay and increase in US interest rates.
The greenback slid over 1% against a basket of world prices, lending some support to the prices of US denominated commodities.
Still, cocoa futures sunk on selling pressures from operators in the Ivory Coast, the world’s biggest producer.
December cocoa in New York settled down 1.4%, at $3,052 a tonne.
Arabica tumbled on technical selling and the weak commodity outlook, after touching a three-month peak early in the session.
December arabica settled down 3.6%, at 135.25 cents a pound. September robusta coffee closed down 1.5%, at $1,699 a tonne.
October raw sugar in New York closed down 0.8%, at 10.54 cents a pound.
(Source – http://www.agrimoney.com/marketreport/pm-markets-grain-prices-collapse-on-historic-wasde-data–3259.html)