Grain, soy prices tumble after US hikes supply hopes

Corn futures tumbled close to contract lows, and January soybean futures did hit their weakest ever, after US officials hiked estimates for both crops to multi-year highs, with wheat prices extending losses too.

Corn futures for December touched $3.58 a bushel at one point, a drop of 2.4% on the day, to 0.5 cents above a contract low set three months ago.

Soybeans for January, the best-traded contract, did record a contract low, of $8.52 ½ a bushel.

The declines followed bigger-than-expected upgrades by the US Department of Agriculture to its forecasts for domestic inventories of both crops as of the end of 2015-16, in part thanks to estimates for US harvests being lifted more than traders had forecast.

'US supplies uncompetitive'

For corn, the harvest was pegged at 13.654bn bushels, a far bigger upgrade than investors had forecast, thanks to a yield which, at 169.3 bushels per acre, is now seen only 1.7 bushels per acre below last year's record high.

The US said that "record yields are forecasted" for states including top producer Iowa, as well as Minnesota, Nebraska and South Dakota.

Meanwhile the estimate for demand for the crop was cut by 100m bushels, reflecting reduced expectations for consumption by ethanol plants – which are switching to sorghum – and exports.

"US corn export sales and shipments lag well behind last year at this time," the USDA said.

"US supplies remain uncompetitive in many foreign markets as corn from Brazil continues to undercut US offerings."

The revisions fed through into an estimate of corn stocks ending the season at 1.76bn bushels – the highest since 2005-06, and some 160m bushels more than investors had expected.

Record yield

For soybeans, US inventories were seen ending the season at 465m bushels, some 29m bushels more than investors had forecast, and the highest in nine years.

Again, the USDA lifted its estimate for the domestic harvest by more than expected, reflecting a yield which, at 48.3 bushels per acre, was now seen setting a record high.

The upgrade was "mainly on gains for Iowa, Illinois and Minnesota," the USDA said.

Unlike with corn, however, the production gain was in part offset by an increased forecast for demand, with expectations for exports lifted by 40m bushels to 1.72bn bushels, following a recent pick-up in orders, and reflecting the increased supplies.

'Very slow pace'

The estimate for wheat stocks at the close of 2015-16 was lifted by more than investors had forecast too, by 50m bushels to a six-year high of 911m bushels, reflecting a cut to export expectations.

Exports, downgraded by 50m bushels to 800m bushels, were on course to "be the lowest since 1971-72", the USDA said, flagging a "very slow pace to date and continued lack of US price competitiveness".

Chicago wheat futures stood 2.2% lower at $4.90 ¾ a bushel some 45 minutes after the data were released, surrendering the psychologically important $5.00-a-bushel mark.

'Biggest surprise'

The Wasde also lifted the estimate for world corn stocks by 24.1m tonnes to 211.9m tonnes, thanks to a hike to the forecast for supplies in China, reflecting "downward revisions to China corn feeding" since 2013-14.

The world corn inventory rejig was termed the "biggest surprise" in the Wasde by Terry Reilly at broker Futures International, who termed the overall report as "bearish" for prices.

At Global Commodity Analytics, Mike Zuzolo termed the world figure "shocking".

"This is likely the most price-negative feature to this month's report," he said.

At Benson Quinn Commodities, Kim Rugel termed the overall Wasde report "bearish", citing "bigger yields and carryouts".

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