Grain futures tumble, despite US stocks figures falling short of forecasts

13.10.2016

Bumper US corn, soybean and wheat harvests will lift stocks by less than investors had expected, thanks to success in finding extra import buyers, according to official data – although prices tumbled nonetheless.

The US Department of Agriculture, in its flagship monthly Wasde crop supply and demand report, pegged domestic soybean stocks at the close of 2016-17 at 395m bushels - a doubling over the course of the season but a figure smaller nonetheless than investors had expected.

While the USDA raised its estimates for the soybean yield by 0.8 bushels per acre to a record 51.4 bushels per acre, close to the figure expected by investors, it did not raise its estimate for area of the oilseed, as the trade had anticipated.

Furthermore, it lifted the estimate for US exports in 2016-17 by 40m bushels to an all-time high of 2.03bn bushels (55.1m tonnes).

'Higher prices'

For corn too, the USDA's revised inventory figure for the close of 2016-17, at 2.32bn bushels, was a little lower than the market had expected.

Corn data in Wasde, difference from previous and (from market forecast)

US harvested area: 86.836m acres, + 286,000 acres, (+86,000 acres)

US yield: 173.4 bushels per acre, -1.0bpa, (-0.1 bpa)

US production: 15.057bn bushels, -36m bushels, (-3m bushels)

US carryout stocks: 2.32bn bushels, -64m bushels, (-39m bushels)

World carryout stocks: 216.81m tonnes, -2.65m tonnes, (-1.51m tonnes)

Data for 2016-17. Sources: USDA, Reuters, Agrimoney.com
The USDA in fact, besides cutting its estimate for the US corn yield this year in line with investors' expectations, raised its forecast for exports by 50m bushels to a nine-year high of 5.28bn bushels (56.5m tonnes), "reflecting current US export commitments that are well above a year ago".

And the slight tightening in the balance sheet - with US stocks now seen rising by 582m bushels, rather than the 648m bushels the USDA had previously expected – was reflected in a small increase in the expectation for farmgate prices too, of $0.05 a bushel to $2.95-3.55 a bushel.

"This month's 2016-17 corn outlook is for lower production, increased exports, reduced stocks, higher prices," the USDA said.

'Quality problems'

Meanwhile for wheat, the USDA also raised its forecast for average farmgate prices over this season, from $3.30-3.90 a bushel to $3.50-3.90 a bushel.

Wasde wheat data, difference from previous and (from market forecast)

US carryout stocks: 1.138bn bushels, +38m bushels, (-15m bushels)

World carryout stocks: 248.37m tonnes, -700,000 tonnes, (-1.35m tonnes)

Data for 2016-17. Sources: USDA, Reuters, Agrimoney.com

The estimate for use of wheat in livestock feed was slashed by 70m bushels to 260m bushels, thanks to data two weeks ago on domestic stocks which, in coming in at a 29-year high, "indicated lower-than-expected" consumption.

However, this boost to supply prospects was in part offset by a 25m-bushel upgrade to a three-year high of 975m bushels (26.5m tones) in the estimate for exports in 2016-17 thanks to "the increased competitiveness of US wheat".

This was expected to be "particularly" evident in the key North African wheat import market, "where the European Union has lost some market share because of lower production and quality problems".

'Price supportive'

The report was deemed "price supportive overall" by Mike Zuzolo at Global Commodity Analytics.

Soy data in Wasde, difference from previous and (from market forecast)

US harvested area: 83.047m acres, +10,000 acres, (-68,000 acres)

US yield: 51.4 bushels per acre, +0.8bpa, (-0.1 bpa)

US production: 4.269bn bushels, +68m bushels, (-17m bushels)

US carryout stocks: 395m bushels, +30m bushels, (-18m bushels)

World carryout stocks: 77.36m tonnes, +5.19m tonnes, (+4.08m tonnes)

Data for 2016-17. Sources: USDA, Reuters, Agrimoney.com

"US soybean ending stocks remained below 400m bushels and US corn yield was lowered by 1 bushel an acre," he said.

However, the data provided only temporary support to grain prices, with wheat futures for December reversing an initial post-Wasde bounce to close down 2.7% at $3.69 ѕ a bushel in Chicago.

Similarly, corn futures for December lost early firmness to end down 2.4% at $3.37 a bushel.

"The US corn ending stock estimate was," even after its downgrade, "still the highest since 1987," said Mark Welch at Texas A&M University.

At broker Country Futures, Darrell Holaday said that the "bottom line is that the US has a lot of corn to grind through as illustrated by record demand projections, but an ending stock number that is still north of 2.2bn bushels".                            

Corn vs soybeans

Soybean futures also fell, by 0.9% to $9.45 Ѕ a bushel for November delivery.

"I think the industry is concerned that yields are larger" even than the record 51.4 bushels per acre that the Wasde briefing showed, Mr Holaday said.

Nonetheless, Mr Zuzolo said that "we should not be surprised" by soybeans falling less than corn, after the oilseeds' recent spell of underperformance.


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