Headlines:

  • Corn, winter wheat drag grains lower, as US supply hopes top expectations
    Corn and winter wheat futures led grains lower, undermining resilience in soybean and spring wheat prices, after US officials, in long-awaited crop data, held with their corn yield forecast despite dryness in parts of the Corn Belt. Corn futures for December plunged 3.9% at one point, falling below $4 a bushel, after the US Department of Agriculture, in its much-watched WASDE briefing, confounded expectations of most investors by sticking by estimates for a strong US yield this year, of 170.7 bushels per acre, despite deteriorating crop condition. The USDA acknowledged that “during June, harvested-area weighted precipitation for the major corn producing states was below normal”. However, the rainfall shortfall “did not represent an extreme deviation from average”, the department said, pegging US corn stocks at the close of 2017-18 at 2.325bn bushels – an upgrade of 215m bushels from last month, and well above market expectations too.

Summary:

According to today’s USDA Supply and Demand report, ending stocks continue to tighten for the US Beans crop. Yield estimates on the other hand remain unchanged and with supply numbers remaining large. The USDA data was not well received by the trade today which resulted in significantly lower prices over the course of the day. Trade analyst were at a loss as to why the USDA had not adjusted yields lower given the deteriorating crop conditions that have been falling at the hands of hot and dry weather. USDA briefing is as of July 1st so that too may be playing a role in the surprise results today.

Next year’s Corn carryout was pegged at 2.235 billion bushels which was higher than initial expectations. September Corn was both the biggest percentage and point loser on the day across the three September grain contracts. Both Corn and Wheat finished near the lows of the day but Soybean recovered about half of the day’s lows when the dust settled. It would appear that the Soybean selloff was a knee-jerk response but for Corn and Wheat the correction could run a bit deeper.

In its report, the USDA pegged the US 2016-17 Corn ending stocks at 2.37 billion bushels versus the prior month’s estimate of 2.29 billion bushels. For the 2017-2018 marketing year, the US Corn ending stocks are estimated at 2.32 billion bushels versus the prior month’s 2.11 billion. The 2016-2017 US Soybean ending stocks was pegged at 410 million bushels which was 40 million shy of the USDA’s June estimate. The 2017-18 Soybean ending stocks was listed at 460 million bushels versus the prior month’s estimate of 495 million. The 2017-18 Wheat ending stocks were pegged at 938 million bushels which was about 14 million bushels more than the USDA June estimate.