Wheat prices tumbled to a nine-year low, with corn futures plunging too, after the US raised hopes for domestic supplies of both grains – contrasting with strong gains in the soybean market.
Chicago wheat futures for September, the best-traded contract, dropped 1.9% to touch $4.36 a bushel, the lowest for a nearest-but-one contract since April 2007.
Corn futures for December slumped more than 4% to hit $3.73 ¼ a bushel at one point.
The plunge took nearly to 19% the drop in prices from a mid-June high, when futures were buoyed by concerns over heat and dryness in the Midwest, were corn crops are on the eve of pollination, a process key in determining yields, and which is particularly sensitive to poor weather.
The drop of the past two weeks has knocked well over $10bn from the paper value of this year’s US corn crop.
The price tumbles followed the release by the US Department of Agriculture of much-watched data on US sowings, and on domestic grain inventories as of the start of the month – reports with a history of provoking large price swings on futures markets.
For wheat, the USDA pegged plantings at 50.8m acres – a drop of 3.8m acres year on year, and indeed the lowest figure in nearly 50 years.
However, the figure represented an upgrade of 1.2m tonnes from a USDA forecast in March, following a grower survey, and was well above market expectations.
Most of the increase in area from the March number was down to farmers sowing more spring wheat than they had initially expected.
Farmers planted 94.1m acres with the grain, up 550,000 acres from the March estimate – and catching off guard a corn market which had expected a drop in the sowings number.
The extra acres, implying extra corn production this year, come at a time when US supplies of the grain left over from previous harvests are larger than had been thought, with the USDA pegging stocks at 4.72bn bushels.
That is 194m bushels more than investors had expected.
Soybean inventories as of the start of the month, at 870m bushels, were also a little stronger than expected by investors, given a strong US export programme, and suspicions that the 2015 harvest may have been overestimated.
However, the impact on supply prospects from the extra stocks was more than offset by acreage data showing that US growers had seeded 83.7m acres with the oilseed.
While representing a record high, and a figure 1.5m acres above the March forecast, the figure was nearly 150,000 acres short of market expectations.
Corn supply implications
At broker Futures International, Terry Reilly said that, for corn, the USDA’s stocks data indicated that a “much larger amount of feed corn was not used” in the spring than had been thought.
He added: “Look for the USDA to lower feed use by 150m bushels” in the corn balance sheet when it on July 12 publishes its next monthly flagship Wasde report on world crop supply and demand.
The USDA has already forecast a decline of 73m bushels, to 5.25bn bushels, in domestic corn feed use in 2015-16.
Meanwhile, the extra sowings prompted Futures International to raise to a record 14.739bn bushels its forecast for US corn production this year, some 300m bushels above the current USDA forecast.
(Source – http://www.agrimoney.com/news/corn-futures-tumble-wheat-hits-9-year-low-as-us-lifts-supply-hopes–9707.html)