(Wall Street Journal) – Grain and soybean prices tumbled to multiweek lows Tuesday after the U.S. Department of Agriculture forecast larger domestic production and supplies than analysts expected.
In a monthly report, the government estimated that U.S. corn output this autumn would total 13.654 billion bushels, the third-largest crop in history and above analyst estimates for about 13.56 billion bushels. The USDA said yields would reach 169.3 bushels an acre, the second-highest after last year’s record of 171 bushels an acre.
The corn figures topped the USDA’s projections in October for output of 13.555 billion bushels on yields of 168 bushels an acre and highlighted how largely favorable weather at the end of the growing season helped crops thrive in much of the Farm Belt.
The government on Tuesday also raised its outlook for U.S. soybean production to a record 3.981 billion bushels, 2% higher than it projected in October, and above analyst projections for about 3.91 billion bushels.
The bigger-than-expected supply forecasts come as farmers are wrestling with softer overseas demand for corn and wheat, in part because of the strong U.S. dollar, which makes American commodities more expensive for foreign buyers.
The combination of bigger supplies and reduced outlooks by the USDA on Tuesday for overseas purchases of the grains weighed on prices, analysts said.
“We already had trouble moving corn, and now we’ve got to move more corn,” said John Kleist, director of research for brokerage Ebottrading.com. “The broad takeaway when you look at the world stockpiles and the U.S. stockpiles is that we have plenty of product. It’s going to take a crop problem somewhere, maybe in South America, or an incredible turnaround in demand in a very uncertain economic picture globally, to get out of it.”
Corn futures for December delivery fell 7 3/4 cents, or 2.1%, to $3.59 a bushel at the Chicago Board of Trade, the lowest closing price in about two months.
Corn prices are trading at less than half their peak of more than $8.30 a bushel in August 2012.
The government said U.S. stockpiles of corn at the end of the 2015-16 season next August will total 1.76 billion bushels, up from 1.561 billion estimated in October. The government lowered its projection for 2015-16 corn exports by 50 million bushels, to 1.8 billion bushels.
Lightly traded November soybean futures, the front-month contract, fell 9 cents, or 1%, to $8.64 1/2 a bushel on the CBOT, the lowest settlement in about six weeks.
Most actively traded January soybean futures declined 10 3/4 cents, or 1.2%, to $8.55 1/2 a bushel.
The USDA estimated soybean yields of 48.3 bushels an acre, above analyst predictions of 47.5 bushels an acre.
Domestic soybean inventories will total 465 million bushels next August, the USDA said. Analysts had pegged stockpiles at 429 million.
Wheat prices also dropped after the USDA forecast larger-than-expected U.S. supplies of the grain.
The government projected domestic inventories of wheat at the end of the 2015-16 season next May at 911 million bushels, up from its October estimate of 861 million bushels. Analysts projected 866 million bushels.
Globally, the government estimated wheat stockpiles for the 2015-16 season will total 227.3 million metric tons, down slightly from October’s estimate of 228.5 million tons. Analysts projected 227.9 million tons.
The USDA cut its forecast for U.S. wheat exports in the 2015-16 season to 800 million bushels, which would mark the lowest since 1971-72 for the world’s leading wheat exporter.
CBOT December wheat futures fell 11 cents, or 2.2%, to $4.90 3/4 a bushel, the lowest closing price in about three weeks.
