The government unexpectedly cut its estimate of the record-large U.S. soybean crop by one per cent on Nov. 9 due to lower yields, and said red-hot exports will reduce the stockpile to a bare-bones three-week supply by next fall, one-third thinner than forecast.
In a monthly update, the Agriculture Department also pared its forecasts for U.S. wheat and corn crops by one per cent, but traders said the focus was squarely on soybeans, which have lagged the rally in other grain prices this year.
Soybean futures touched a 26-month high when trading opened at the Chicago Board of Trade after the report, reaching $13.35 a bushel.
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“It’s a bullish bean report,” said Jack Scoville of The Price Futures Group. “Cutting back on the yield was a surprise. I don’t think the increase in demand is a surprise; if anything, I think there is still some room to go on that.”
Based on lower or flat yields in most major growing states, USDA pegged the soybean crop at 3.375 billion bushels, down one per cent from October and barely larger than last year. Traders had expected a two per cent rise.
Soybean exports are forecast for a record 1.57 billion bushels in 2010-11, due to high demand. China accounted for 70 per cent of U.S. soybean exports since the Sept. 1 start of the marketing year. Ending stocks were estimated at 185 million bushels, one-third below the amount that traders expected.
Carry-over stocks have been tight but rebuilding since dipping to 138 million bushels in 2008/09, the second-lowest end stocks in 12 years.
The USDA also raised its forecast for soybean crops in Brazil and Argentina, the No. 2 and No. 3 growers, from last month’s view due to larger plantings. The La Nińa weather phenomenon may reduce and delay rainfall in Brazil. Private forecaster John Schnittker said the South American crop could have a one-sided effect – a shortfall would drive up prices but a larger crop “would not be enough to cut prices a lot.”
Third corn yield cut
USDA cut its forecast of the U.S. corn crop for the third month in a row due to disappointing yields, this time by one per cent, similar to trade assessments of the crop. The crop of 12.540 billion would be the third largest on record but fall seven per cent behind demand by exporters, livestock feeders, foodmakers and the ethanol industry.
Corn ending stocks would total 827 million bushels – half the stockpile available at the start of this marketing year and the smallest in 15 years.
Ethanol makers will use 38 per cent of this year’s crop, enough to make 13.4 billion bushels of the alternative fuel through next Aug. 31, said USDA. It foresaw larger ethanol exports and said, “Ethanol prices continue to track higher with corn prices, supporting returns for ethanol producers.”
USDA trimmed its estimate of the wheat harvest by one per cent, to 2.208 billion bushels, following a resurvey of durum and spring wheat growers. It lowered its forecast for ending stocks to 848 million bushels, compared with trade expectations of 855 million bushels.
Although U.S. corn and soybean output is down, the world supply is relatively unchanged. USDA forecast a larger corn crop in China, where dry summer weather raised doubts about the crop. China is No. 2 in corn production to the United States.
