(Wall Street Journal) – Federal forecasters on Tuesday said global crop stockpiles continued to grow though U.S. grain and soybean prices closed higher in part on concerns that bad weather could affect harvests in some breadbasket nations.
Corn, soybean and wheat prices all advanced after the U.S. Department of Agriculture released its closely watched monthly update on supply and demand conditions, even as agribusiness executives cautioned the global glut was set to continue.
The report “was a speed bump and the market took it that way,” said Don Roose, president of U.S. Commodities, a brokerage in West Des Moines, Iowa. Grain and soybean markets initially slipped from session highs after its publication. Weather was a key factor supporting prices, Mr. Roose said.
The USDA forecast larger-than-expected world corn stockpiles, estimating global inventories in the 2015-16 season would total 208.9 million metric tons, up from its March estimate of 207 million and above analysts’ expectations.
The agency also projected bigger-than-expected domestic stockpiles of the grain, saying U.S. corn reserves at the end of the 2015-16 season on Aug. 31 would total 1.862 billion bushels, up from last month’s forecast of 1.837 billion.
Corn futures for May delivery rose 6 cents, or 1.7%, to $3.62 3/4 a bushel at the Chicago Board of Trade, the highest closing price since March 30.
Worries over inclement weather in South America helped boost crop prices. Hot, dry conditions in Brazil could threaten corn yields there, while rains in Argentina are delaying that country’s soybean harvest and potentially curbing output.
Still, the USDA’s projections for larger world inventories of the three major row crops come as elevated global crop reserves and production continues to outstrip demand, weighing on prices of many crops.
Massive world crop stockpiles will keep world agricultural prices under pressure despite continued strong Chinese demand, said Gonzalo Ramírez Martiarena, chief executive of agricultural trading firm Louis Dreyfus Company, at the FT Commodities Global Summit in Lausanne, Switzerland, on Tuesday.
“You really need a good disaster to lose a crop,” said Mr. Ramírez Martiarena. “I don’t see that situation going forward.”
Soybean closed at a fresh eight-month high despite the USDA’s projection for slightly larger world soybean reserves.
The agency said global soybean stockpiles for the current season would total 79 million tons, up modestly from 78.9 million projected last month.
Prices for the oilseeds also benefited from a reduced outlook for domestic soybean supplies, with the USDA pegging U.S. stockpiles in August at 445 million bushels, down from its March estimate of 460 million.
Analysts said a declining U.S. dollar, increased fund buying and political uncertainty in Brazil, a major U.S. rival in soybean production and export, also propped up the oilseed market on Tuesday.
CBOT May soybean futures added 8 cents, or 0.9%, to $9.36 1/4 a bushel, the highest closing price since Aug. 14.
Wheat prices gained after the USDA’s domestic stockpile estimate fell below analysts’ expectations. The government projected U.S. wheat reserves as of May 31, the end of the season for that commodity, would total 976 million bushels, up from its previous forecast for 966 million.
World wheat reserves this season will total 239.3 million tons, higher than the government’s previous forecast of 237.6 million tons.
