|Corn and soybean prices fell after USDA estimates for US supplies in its latest Wasde report proved more generous than markets had expected, but wheat failed to rise on a deep cut to world inventory hopes.
Chicago corn futures for December-23 expanded losses beyond 2% after the USDA unexpectedly raised its forecast for this year’s US harvest (see below).
Soybean futures for November-23 took their decline above 1.0%, after the USDA, while cutting expectations for the US yield in line with levels investors had pencilled in, cut its US export outlook too.
For wheat, the USDA cut its expectations for world 2023/24 production and carryout stocks markedly, notably in the major exporting countries whose stocks are most important for setting world prices.
However, wheat futures struggled nonetheless against the downbeat grain market backdrop, cutting their losses from levels seen ahead of the Wasde, but remaining in negative territory nonetheless.
The USDA, unexpectedly, raised its forecast for US corn production this year, if by a modest 600Kt to 384.4kt, rather than lowering it by 3.2Mt as speculative investors had expected.
While the USDA did lower its yield estimate to reflect damage from recent Midwest heat and dryness, the downgrade of less than 0.1t/ha, to 10.91t/ha, was less significant than the market had pencilled in.
This was coupled with an unforeseen increase of 800M acres, to 94.9M acres, in the estimate for sowings in the spring, which was marked by an unusually benign planting window meant.
“Acreage updates were made in several states based on a thorough review of all available data,” the USDA said.
The increased production figure was reflected in an upgrade of 460Kt to 56.4kt in the estimate for US corn stocks at the close of 2023/24, rather than the downgrade of 1.7Mt that investors had envisaged.
The revision, and a small upgrade to the Ukraine harvest, were reflected in an unexpected increase of nearly 3.0Mt, to 314.0Mt, in the estimate for world carryout stocks too.
The USDA lowered its forecast for this year’s domestic soybean yield by 0.05t/ha to 3.37t/ha, in line with market expectations.
While the area estimate attracted a fractional upgrade, the lower yield figure translated into a reduction of 1.6Mt to 112.8Mt in the US harvest estimate, again in line with market forecasts.
However, a reduction in the US export forecast for 2023/24, of 950Kt to 48.7Mt, limited the downgrade to the carryout stocks estimate to less than 700kt. Markets had expected a bigger downgrade.
The world stocks estimate was kept nearly unchanged, when the market had pencilled in a 1.0Mt cut. The reduction in the US figure, and a cut to the Brazil estimate on increased export expectations, was offset by an increase to the Argentine inventory estimate.
The USDA cut by 6.0Mt, to 787.3Mt, its forecast for world wheat production in 2023/24 – taking the figure below last season’s total to represent the first year-on-year decline in five years.
The downgrade reflected reduced expectations for harvests in a range of key producers, including Argentina, Australia, Canada and the EU – four of the top exporters whose stocks are particularly important in setting world prices.
The EU harvest, now seen falling marginally year on year, to 134.0Mt, was also noted for quality setbacks. The USDA said that “wet weather during harvest… is expected to result in higher amounts of lower-quality wheat used for feed” in the EU, as it is in China too.
The reduced production forecast, and enhanced expectation for wheat use in feed, were reflected in a cut of 7.0Mt, to 258.6Mt in the forecast for world wheat stocks at the close of 2023/24 – an eight-year low.
“Ending stocks are tightened in many countries this month, particularly for several major wheat exporters,” the USDA said.