Corn, soybean and wheat futures tumbled after US officials, in a much-anticipated briefing, pegged domestic supplies of all three crops above market expectations – with world wheat supplies supported too by a huge upgrade to Russia’s harvest.
Corn futures for December tumbled 4.1% to $3.70 ½ a bushel in late deals in Chicago – their lowest level in 10 months.
Soybean futures for November stood down 3.4% at $9.39 ¾ a bushel, their weakest since late June.
Winter wheat futures for September slumped 3.8% to $4.42 ¾ a bushel in Chicago, setting a two month low.
On the Minneapolis exchange – which trades the spring wheat which has been particularly closely watched by investors thanks to dryness in major growing regions in the US and Canada – best-traded December futures stood down 3.4% at $7.20 ½ a bushel.
The declines followed crop estimates in the US Department of Agriculture’s monthly Wasde report on world crop supplies and demand which reversed ideas of a drop in world soybean supplies in 2017-18, and lifted expectations for the rise in wheat inventories.
In corn, the estimate for US stocks at the close of 2017-18 was reduced, but by far less than investors had expected.
Indeed, rather than cutting its estimate for the US corn yield by 2.5 bushels per acre, as investors had expected after a dry July for much of the Midwest, the USDA downgraded the forecast by a modest 1.2m bushels per acre, to 169.5 bushels per acre.
While South Dakota, Iowa, Minnesota, and Illinois “are forecast to have yields below a year ago… the projected yield for Indiana is unchanged relative to last year, while Nebraska and Ohio are forecast higher”, the USDA said.
While the yield reduction translated into a harvest downgrade of some 100m bushels, the cut was offset in part by a drop in expectations for corn exports and for domestic feed use of the grain.
Although the US corn inventory forecast for the close of 2017-18 was downgraded by 50m bushels to 2.27bn bushels, that was well above the 2.00bn-bushel figure the market had expected.
For soybeans, the USDA actually increased its domestic yield estimate, by 1.4 bushels per acre to 49.4 bushels per acre, rather than cutting it to 47.5 bushels per acre as traders had forecast.
While some of the extra soybeans were seen being used up by increased export prospects, thanks to “lower prices”, the upgrade translated into a 15m-bushel increase to 475m bushels in the estimate for US soybean inventories at the close of 2017-18.
That was 50m bushels more than investors had expected.
The upgrade fuelled a 4.3m-tonne hike to 97.8m tonnes in the estimate for world soybean inventories at the close of 2017-18, well ahead of market forecasts.
For wheat, meanwhile, although the estimate for US output in 2017-18 was cut by 21m bushels, that was less than 50m-bushel downgrade that the market had expected.
Figures for both winter and spring wheat came in ahead of investors’ forecasts.
And global supply prospects received a mammoth boost from an 8.6m-tonne hike to a record 77.5m tonnes in the forecast for Russian wheat output this year.
The USDA flagged official Russian reports of “high winter wheat yields in the Southern, North Caucasus, and Central Districts of Russia.
“In addition, satellite imagery indicates outstanding conditions and high potential yields in the country’s spring wheat zone, including the Siberian, Ural, and Volga Districts.”
The data were termed “bearish” by Futures International, which said that “US supply for 2017 for corn and soybeans surprised us in that yield estimates were well above trade expectations, resulting in large 2017-18 US stocks”.
Benson Quinn Commodities also termed the data “bearish”, while at Global Commodity Analytics, Mike Zuzolo said that “this report, if taken at face value, removes nearly all possibility of a pre-harvest rally.
“It is as negative for prices as July’s [Wasde] report was. USDA repeated their assessment and doubled-down in big supplies. Period.”
Mr Zuzolo – while saying he was “pretty speechless” over the corn and soy yield data, given the apparent threat to crops from weather and lower crop condition ratings – advised investors to “be ready to initiate increased soybean sales, based upon where we close today”.
(Source – http://www.agrimoney.com/news/corn-soy-wheat-prices-plunge-on-buoyant-us-crop-supply-hopes–10942.html)