U.S. soybean futures rallied more than three per cent on Monday after the U.S. government made deeper-than-expected cuts to its forecasts for production and end-of-season stocks and as a dry spell in the Midwest suggested yields could drop even further.
Corn futures added more than two per cent after the U.S. Department of Agriculture cut its production forecast instead of increasing it, as most traders had expected. Gains were tempered as USDA was still forecasting a record-large crop and a near-tripling of stocks by the end of next season.
“The big surprise and shocker is soybeans. They cut the yield 1.9 bushels (per acre) from July and that’s a severe cut. You have new-crop stocks back down to 221 million bushels now and that’s a pretty bullish number,” said Karl Setzer, analyst for MaxYield Co-operative.
In its August supply and demand reports, USDA said U.S. farmers will reap the biggest corn crop and the third-largest soybean crop ever, but the harvest will be smaller than traders expected because of lower yields.
U.S. stocks at the end of the 2013-14 marketing year next Aug. 31 were forecast at 1.837 billion bushels of corn and 220 million bushels for soybeans, both the largest since 2006. Analysts polled ahead of the report had expected corn stocks of 1.971 billion bushels and soybeans of 263 million bushels.
The latest weather forecasts for the U.S. crop belt suggest drier conditions over the coming weeks which could begin trimming yield potential.
Corn has already pollinated and needs moisture to fill grain kernels. August weather is more critical for soybean plants, which will be adding new pods and filling them with beans.
USDA on Monday confirmed private sales of 853,000 tonnes of U.S. soybeans to China and unknown destinations for delivery in the 2013-14 marketing year.
“Soybeans are gaining with the forecasts for lower production and with the drier weather in the forecast,” said Rich Nelson, chief strategist with Allendale Inc.
“The sale to China was sort of the frosting on the cake, certainly the size of it was surprising.”
Chicago Board of Trade November soybeans rose 43 cents, or 3.6 per cent, to $12.25-1/4 a bushel, the contract’s highest since July 30 and its steepest percentage gain since March 2011 (all figures US$).
CBOT December corn gained 10-3/4 cents to close at $4.64 a bushel, a 2.4 percent jump that was the steepest in a month. Prices earlier hit a low of $4.51-1/2, a level not seen on the contract since early October 2010.
Commodity funds bought a net 14,000 corn contracts and 11,000 soybean contracts on the day, trade sources estimated.
Wheat futures firmed modestly on the day, guided by higher corn and soybeans.
CBOT September wheat added 1-1/2 cents and settled at $6.35 a bushel after hitting a low of $6.30, the weakest front-month price since June 2012.
— Karl Plume reports for Reuters from Chicago. Additional reporting for Reuters by Sam Nelson in Chicago.