U.S. corn futures soared to a two-week high on Friday after the U.S. Department of Agriculture shocked traders by cutting its estimates for U.S. corn production and inventories in highly anticipated crop reports.
Wheat futures tumbled to their lowest level since July 2010 on larger-than-expected supply forecasts.
Traders paid close attention to USDA’s estimates because farmers are replenishing crop supplies after a historic drought in 2012 slashed output in the United States, the world’s top grain exporter.
USDA pegged 2013-14 U.S. corn production at a record 13.925 billion bushels, below its last estimate, in November, of 13.989 billion. Analysts had expected USDA to raise the estimate to 14.066 billion due to favourable conditions at harvest time in the fall.
The average corn yield was seen at 158.8 bushels per acre, down from USDA’s November estimate of 160.4 bushels. Analysts had been looking for an increase to 161.2 bushels.
“The fact that it went down was particularly surprising to a lot of the traders,” Jim Gerlach, president of A/C Trading, said of the yield estimate. “You definitely caught the market leaning the wrong way.”
Prices rallied after nearby March corn on Thursday dropped to the lowest level for a front-month contract since August 2010.
Chicago Board of Trade March corn ended up 20-3/4 cents at $4.32-3/4 a bushel (all figures US$). March soybeans were up 4-3/4 cents at $12.78-1/2 a bushel.
U.S. soybean production, at 3.289 billion bushels, was up one per cent from November but not far from the average guess of 3.279 billion. USDA left yields nearly unchanged from November at 43.3 bushels per acre.
“That reduction in corn yield is the biggest shocker,” said Joe Vaclavik, president of Standard Grain. “We were actually looking for a one-bushel increase and what we got was a close to a two-bushel reduction.”
U.S. corn inventories as of Dec. 1 were 10.426 billion bushels, up from 8.033 billion a year earlier but below analysts’ expectations for 10.79 billion.
Worldwide, the USDA projected global 2013/14 corn ending stocks at 60.23 million tonnes, down from its December estimate of 162.46 million. Analysts had predicted USDA would raise its outlook to 163.2 million.
Global wheat supply grows
Larger-than-expected wheat supplies jolted traders as they had expected only minor adjustments in USDA forecasts of U.S. and world wheat stockpiles.
CBOT wheat fell to a 3-1/2 year low after USDA raised its outlook for global 2013-14 ending stocks to 185.4 million tonnes from its December outlook of 182.78 million. March wheat ended down 15-1/4 cents at $5.69 a bushel.
Following the decline, Egypt, the world’s top wheat importer, issued a tender to buy an unspecified amount of wheat from global suppliers for shipment Feb. 11-20.
Demand remained strong for soybeans. Private exporters struck deals to sell 216,000 tonnes of U.S. soybeans to China for the 2014/15 marketing year, which begins on Sept. 1, the USDA said in a daily announcement. The sale was the fourth to China announced by USDA this week.
USDA, in the daily announcement, also said exporters struck deals to sell 180,000 tonnes of U.S. corn to unknown destinations during the 2013-14 marketing year, which started on Sept. 1. Exporters sold 125,700 tonnes of U.S. wheat to Venezuela for delivery during 2013-14, which for wheat started on June 1.
— Tom Polansek reports on agriculture and ag commodities for Reuters from Chicago. Additional reporting for Reuters by Naveen Thukral in Singapore and Sybille de la Hamaide in Paris.