Double dent to US corn, soy supply hopes sends prices soaring

July 1st, 2015

By:

Category: Grains, Oilseeds

corn-planted-acres(Agrimoney) – Corn and soybean futures soared to a five-month highs after the US delivered a double whammy to supply hopes of both crops – revealing less in domestic stockpiles than expected, and less sown this year than forecast too.

Soybean futures for July soared more than 5% at one stage to $10.57 ½ a bushel, the highest for a spot contract since mid-January.

The best-traded, new crop November contract also leaped 5% at its peak to a near-six-month high of $10.29 a bushel.

Corn futures for July rocketed 6.1% at one stage to $4.06 ½ a bushel, also the highest for a spot contract since early January.

The higher volume, new crop December jumped 5.5% to $4.24 ½ a bushel to repeat the same feat.

‘Big crops getting smaller’

The gains followed the release of much-anticipated briefings on US grain inventories, as of the start of the month, and on sowings of crops for this year’s harvest – with both reports coming in with figures below market expectations.

Meanwhile, corn and soybean yield expectations have been dented by deterioration in crop condition to well below 2014 levels, as confirmed in separate US Department of Agriculture data overnight, which highlighted crop damage from persistent rains.

“Big crops [are] getting smaller,” said Societe Generale analyst Christopher Narayanan.

“With crop conditions declining, and slow development the wet weather provides yet another risk to the supply side of the crop balances.

“Consultations with agronomists suggest that the chance for another year of record yields is highly unlikely.”

While data proved less bullish for wheat, with both Tuesday’s inventories and plantings figures exceeding traders’ forecasts, and condition data showing ratings holdings too, crop prices in the grain were pulled higher by the buying spree in row crops.

‘Supportive to prices’

For corn, Tuesday’s data showed inventories as of the start of the month at 4.45bn bushels, nearly 600m bushels higher than a year before – a reflection of the record 2014 harvest – but 108m bushels below market forecasts.

The figure was “supportive” to prices, said Mike Zuzolo at Global Commodity Analytics, noting that the reading was “very near the lowest trade guess”.

With investors getting a handle on use of corn in exports and for making ethanol from weekly data, Tuesday’s stocks reading implied that feed demand, the other big source of consumption, “was a little better than expected”, said Terry Reilly at Chicago broker Futures International.

This will likely herald an upgrade by the USDA to its expectations for use of the grain by livestock feeders in 2014-15, a stocks, he added.

Meanwhile, the corn acreage number, at 88.90m acres, was below the area indicated by a farmer survey in March, surprising investors who, after a rapid pace of sowings, had foreseen area expanding.

‘Production overstated’

For soybeans, stocks were pegged at 625m bushels, again a healthy rise year on year, but below the trade forecast, by some 45m bushels.

“This was bullish as demand was better than expected or, better yet, it confirms the USDA overstated 2014 production,” Futures International’s Mr Reilly said, foreseeing the potential of a downgrade of 209m-25m bushels to the crop.

Many investors have expressed doubts that last year’s US soybean harvest was as large as officials have reported, with the persistent strength of futures prices for near-term contracts seen as indicating that supplies were not as large as thought.

‘Still overstated’

Meanwhile, the soybean sowings number – which attracted the most comment in the run-up to the report, given rain delays to late plantings – was pegged at 85.14m acres, a little below market expectations.

While up 504,000 acres on the figure suggested by the farmer survey in March, investors expect the figure to be downgraded given the extent to which persistent wetness has hampered plantings.

The USDA unveiled a resurvey for four states, including Kansas and Missouri where farmers have struggled particularly against damage, with the results to be fed into the August Wasde crop report.

SocGen’s Mr Narayan said that Tuesday’s soy planting number “still overstates the actual acreage”.

Mr Reilly said: “More than 4.5m acres of soybeans are unplanted as of Sunday, and all said and done, we think the planted acreage will end up 2m+ acres below the USDA’s projection,” factoring in areas lost to flooding too.

Add New Comment

Forgot password? or Register

You are commenting as a guest.