US supply data injects buzz into corn, spring wheat markets

03.10.2016

The Chicago corn market sprang into life after officials said that US stocks of the grain were not quite as large had been expected - while data on wheat handed another leg up to the premium of spring crop futures.

US corn inventories as of the start of the this month, the close of the grain's 2015-16 marketing year, stood at 1.738bn bushels, the US Department of Agriculture said in a much-anticipated report.

The figure, while up some 6.6m bushels year on year, was some 16m bushels below the figure that investors had expected, and eased fears that US consumption of corn over the summer had been undermined by cheap supplies of rival feed grain wheat.

"Corn stocks came in below our expectations, and implies feed demand was better than expected," said Terry Reilly at broker Futures International.

Corn futures for December, having traded over less than $0.05 a bushel thus far on Friday, and falling into negative territory, ranged over $0.13 Ѕ a bushel in the five minutes following the data.

The contract stood at $3.34 Ѕ a bushel half an hour after the data was released, a gain of 1.6% on the day.

Big wheat stocks

By contrast, in the wheat market, the immediate reaction to the USDA stocks data was to send Chicago futures for December deeper into negative territory, as the report showed US stocks of the grain at 2.53bn bushels - the highest since 1987.

US stocks as of September 1, change on previous and (on market forecast)

Corn: 1.738bn bushels, +22m bushels, (-16m bushels)

Soybeans: 197m bushels, +2m bushels, (-4m bushels)

Wheat: 2.527bn bushels, n/a, (+130m bushels)

Sources: USDA, Reuters, Agrimoney.com
That represented a rise of more than 400m bushels year on year, and was some 130m bushels more than investors had expected, and also lent support to ideas that switching by livestock feeders from corn to wheat had not been as strong as some analyst thought.

However, December futures recovered some ground to stand at $3.98 Ѕ a bushel, down 0.1% on the day, as investors also took account of a separate USDA briefing showing that this summer's harvest had been, at 2.31bn bushels, a little shy of previous official and market expectations.

In particular, the US spring wheat crop was seen at 534m bushels – 37m bushels below the USDA;s previous estimate, and a "surprising" figure, Mr Reilly said.

Spring wheat premium

The lower-than-expected spring wheat production number was "supportive" to prices of spring wheat futures, as traded in Minneapolis, where the December contract indeed rose 1.1% to a five-week high of $5.15 Ѕ a bushel.

US wheat harvest estimates, change on previous and (on market forecast)

Hard red winter wheat: 1.082bn bushels, +34m bushels, (+33m bushels)

Soft red winter wheat: 345m bushels, -27m bushels, (-25m bushels)

White winter wheat: 245m bushels, +8m bushels, (+6m bushels)

Durum wheat: 104m bushels, +12m bushels, (+11m bushels)

Other spring wheat: 534m bushels, -37m bushels, (-36m bushels)

Total: 2.310bn bushels, -11m bushels, (-13m bushels)

Sources: USDA, Reuters, Agrimoney.com

The premium of Minneapolis wheat to Chicago wheat, December basis, touched a contract high of $1.22 Ѕ a bushel at one point – a 16% jump on the day, and representing a marked recovery from a low of $0.29 ј a bushel touched three months ago.

Ideas that the world wheat harvest, while large in quantity, is weak on quality have boosted prices of higher specification wheat, with spring wheat offering particularly high protein levels.

'Sharp two-sided trade'

Benson Quinn Commodities reported "sharp two-sided trade" in grains futures "post the report as the market drills into numbers".

However, the soybean market proved a little less volatile, after the data showed stocks at 197m bushels, a modest 6m bushels higher year on year, and in line with market expectations.

The USDA also nudged lower its estimate for last year's US harvest, as many traders had expected, although by a modest 2.82m bushels, to 3.926bn bushels.

Soybean futures stood up 0.4% at $9.54 Ѕ a bushel.

 

agrimoney

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