The first round looks to have gone somewhat to the grain bears.
That is, INTL FC Stone kicked off on an upbeat note the spree of market estimates for US corn and soybean harvests – ahead of the estimates next Friday which really count, in the US Department of Agriculture’s monthly Wasde crop report.
It raised the estimate for the US corn harvest to 13.541bn bushels, from 13.457bn bushels, citing a higher yield estimate, of 167.0 bushels per acre.
That was up 1.1 bushels per acre from their previous forecast, if still 0.5 bushels per acre below the USDA’s current estimate.
For soybeans, the broker raised its yield forecast by 1.5 bushels per acre to 46.9 bushels per acre, to 0.2 bushels per acre below the USDA estimate.
US soybean production was estimated at 3.919bn bushels, above the 3.791bn bushels FCStone had forecast last month, and compared with a current USDA forecast of 3.935bn bushels.
The estimates come as investors are trying to turn the slew of harvest reports from around the country into something more formal and organised that they can trade on.
And, broadly, the consensus appears to be of crops which, for soybeans especially, have beaten earlier expectations, if falling below last year’s record yield results.
CHS Hedging, for instance, undermined for soybeans “reports of decent yields”, while Steve Freed at ADM Investor Services said that results in the oilseed “continue to be reported near or above early farmer estimates”.
For corn, Mr Freed said that “most farmers are reporting yields better than expected, but still below last year record”.
At Halo Commodity Company, Tregg Cronin reported that “the overall tone to soybean yield reports appears to be increasing, especially in the western Corn Belt where more reports of ‘best ever’ can be heard in elevators and coffee shops alike”.
But is there a discrepancy in the data?
Mr Cronin also flagged that the soybean yield expectations did not relate well to the crop condition scores released in weekly USDA reports.
“The USDA is currently calling for a 47.1-bushels-per-acre national yield with a condition score of 62% [of the crop rated] good or excellent, versus last year’s 47.5 bushels per acre and 72% good or excellent.”
And last year’s US soybean crop size looks to have been overstated.
Furthermore, the ratio of corn to soybean yields is unusually low “implying either the corn yield is too low, or the soybean yield could be a bit high,” Mr Cronin said.
The USDA’s current corn yield estimate would “need a soybean yield of 46.5-46.6 bushels per acre” to match historic ratios.
‘Refreshing to see’
Certainly, there was not much appetite for selling corn and soybeans in early deals, even after traders appeared convinced in the last session of the wisdom of pressing the oilseed lower.
The demand pictures for both crops have improved somewhat with recent export sales data, particularly for soybeans, at least keeping hope alive of a decent showing by the end of 2015-16, (which finishes for the crops next August).
Data for last week, released on Thursday, showing 2.506m tonnes in US soybean exports were actually “above trade expectations and supportive” to price sentiment, said Terry Reilly at Futures International.
“China took 1.178m tonnes, so the remainder to other countries is refreshing to see,” Mr Reilly said.
‘Difficult to see drop in feed demand’
Mr Cronin saw comfort in latest livestock day, with the “recent hogs and pigs report confirming record inventory, broiler hatch and egg set reports remaining above a year ago, and three-year highs in cattle on feed”.
It was “difficult to pencil a reduction in feed demand just yet”, as the USDA is expecting for corn over 2015-16, he said, adding that there was nothing in grain stocks data earlier in the week “to think corn feed demand destruction is under way”.
Corn futures for December stood 0.1% higher at $3.89 ¼ a bushel as of 08:00 UK time (02:00 Chicago time).
Soybean futures for November were up 0.1% at $8.77 ¾ a bushel, remaining just above their 10-day and 20-day moving average, which offered a bit of a safety net during the tumble of the last session.
Furthermore, there remain some concerns over dryness in central Brazil, where farmers are amidst the soybean planting season, although World Weather said there was a “chance for light precipitation… needed to kick-off the planting season.
And there is the potential for weather setbacks in the US too, in the form of rains to stop harvest, depending on how the progress of hurricane Joaquin pans out.
Wheat extends rally
It was also a help to row crop prices that wheat futures continued to find buyers, despite the poor US export data unveiled on Thursday, of just 77,100 tonnes for 2015-16, a marketing year low.
Futures International’s Terry Reilly noted that for wheat, export commitments (ie shipments fulfilled and new orders combined) for 2015-16 were “running at 45.3% of the USDA’s projection for the full season, down from 58.4% at this time last year, and 57.9% for 2013-14”.
Egypt, the top wheat importer, certainly looks reluctant to buy into the rising market, having now gone two weeks without a tender, after four in the previous three weeks or so.
Still, worries remain about dryness in the former Soviet Union, where farmers are attempting sowings, and in Australia, where crops in some areas need moisture to fulfil their yield potential.
Wheat futures for December were 0.2% higher at $5.19 ¼ a bushel, although facing a key technical test for further upward movement, with their 100-day moving average at $5.22 a bushel.
Their progress later today may be influenced by updated official data on Canada’s harvest, expected to show an upgrade of some 500,000 tonnes to 25.1m tonnes in the figure for wheat production.
The estimate for canola is seen being upgraded by 1.2m tonnes to 14.5m tonnes.
Meanwhile, in New York cotton for December stood unchanged at 60.60 cents a pound, remaining just above the 10-day moving average line the contract regained in the last session.
US export sales data of some 122,000 running bales last week were improved but “again fell significantly short of the weekly pace required in order to meet the USDA’s 10.2m-bale export target,” said Louis Rose at the Rose Report.
That would require sales of some 155,000 running bales a week to meet.
US data overnight on domestic use of extra long staple cotton last month came in at 994,000 pounds, up 18% from July, and 62% year on year.
(Source – http://www.agrimoney.com/marketreport/am-markets-corn-soy-hold-firm-despite-better-harvest-hopes–3321.html)