U.S. grains: Rising global supply, technical selling hit prices

U.S. corn and wheat futures hit fresh contract lows on Thursday on weak export demand and technical selling ahead of U.S. crop reports that are expected to raise supply estimates.

Soybean futures were mixed, with Chinese buying helping to support some contracts and offset pressure from rising production prospects worldwide, traders said. Still, expectations for large U.S. plantings in the spring pushed down new-crop contracts, they said.

After good harvests across the northern hemisphere last year, global grain supply is expected to be further replenished by bumper crops in major southern hemisphere producers in early 2014.

In closely watched estimates to be released at 11 a.m. CT on Friday, the U.S. Department of Agriculture (USDA) is expected to increase world corn and soybean inventories, according to a Reuters poll of analysts.

USDA also is expected to increase its estimates for the most recent U.S. corn and soybean harvests.

“The only good thing that can be said about the corn market is that just maybe some of the potential bearishness in the report tomorrow is already being factored in to the price,” said Tomm Pfitzenmaier, analyst for Summit Commodity Brokerage.

March wheat on the Chicago Board of Trade ended down 4-1/2 cents at $5.84-1/4 a bushel and set a new low of $5.78-1/2 (all figures US$). It was the lowest price for a front-month wheat contract since December 2011.

March corn fell five cents to $4.12 a bushel and set a contract low of $4.08. It was the lowest price for a front-month corn contract since August 2010.

March soybeans rose 4-1/2 cents to $12.73-3/4 a bushel, and November soybeans dropped 3 cents to $11.01.

Sluggish export sales

Sentiment in the wheat market has been dampened by sluggish U.S. exports at a time of ample global supply, and news that Indian traders have sealed a first export deal for the new season wheat illustrated overseas competition.

U.S. wheat export sales of 294,800 tonnes for the week ended Jan. 2 were toward the low end of expectations for 200,000 to 500,000 tonnes.

“There are still ideas that more U.S. export business will be done soon, but last week’s export sales were again disappointing,” said Sterling Smith, futures specialist for
Citigroup.

Weekly U.S. corn export sales of 155,200 tonnes were below expectations for 200,000 to 700,000 tonnes, and weekly soybean export sales of 156,200 tonnes missed estimates for 450,000 to 950,000 tonnes.

More than 100,000 tonnes of U.S. corn initially sold to China have been diverted to neighboring Asian markets, according to USDA data issued on Thursday, as Beijing has been stringently testing for an unapproved genetically modified strain found throughout the U.S. grain supply.

China buys soybeans

USDA reported separately that China bought 110,000 tonnes of U.S. soybeans for the 2014-15 marketing year, which starts on Sept. 1, the latest in a string of deals.

USDA reported sales of 115,000 tonnes of U.S. soybeans to China on Wednesday and 350,000 tonnes on Tuesday. China is the world’s top soybean importer.

The sales surprised some traders, who had been expecting China would cancel purchases of U.S. soybeans in favour of purchases of South American soybeans.

In Brazil, the 2013-14 soybean crop may easily exceed 95 million tonnes, Agriculture Minister Antonio Andrade said on Thursday, surpassing crop supply agency Conab’s official estimate of record output of 90.33 million tonnes.

— Tom Polansek reports on agriculture and commodity markets for Reuters from Chicago. Additional reporting for Reuters by Gus Trompiz in Paris and Naveen Thukral in Singapore.

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