(Wall Street Journal) – U.S. soybean prices sank to a one-month low Tuesday after federal forecasters projected a larger-than-expected harvest this autumn and a sharp increase in supplies of the oilseed next year.
Corn futures closed mostly higher despite similar predictions for a large crop.
In a monthly report, the U.S. Department of Agriculture estimated that soybean growers will harvest 3.85 billion bushels this autumn, higher than average analyst forecasts of 3.826 billion but smaller than last year’s record crop. The USDA’s estimate, which would mark the second-largest U.S. soybean crop in history, assumes average weather over the growing season.
The government also said the expected bumper crop this year would increase U.S. soybean stockpiles at the end of the 2015-16 season next summer to 500 million bushels, well above analysts’ forecast of 438 million bushels. The estimate compared with the government’s prediction for inventories of 350 million bushels at the end of the current season this August.
“The surprise in this report was the soybean estimates,” said Brian Hoops, president of brokerage Midwest Market Solutions in Springfield, Mo. The projected 500 million bushels “is a very hard number to swallow” and will pressure prices.
U.S. soybean reserves are expected to mushroom in part because a steep drop in corn prices has driven U.S. growers to plant more soybean acres at the expense of corn. The USDA in March projected record U.S. soybean acreage for the second year in a row. Farmers have turned to soybeans because prices for the oilseed have fallen less in percentage terms than for corn from the two crops’ record 2012 prices, and producing soybeans costs less due to lower seed prices and less need for fertilizer.
Soybean futures for May delivery, lightly traded as the contract nears expiration this week, fell 16 cents, or 1.6%, to $9.67 a bushel at the Chicago Board of Trade, the lowest settlement price for a front-month contract since April 16. July futures, the most actively traded contract, dropped 18 1/2 cents, or 1.9%, to $9.55 1/2 a bushel.
The USDA estimated the U.S. corn crop will total 13.63 billion bushels this autumn, slightly higher than analysts’ estimates for 13.55 billion, but lower than last year’s record 14.216 billion crop. The 2015 projection would rank as the third-largest U.S. corn crop.
The government said lower corn production this year will result in U.S. stockpiles at the end of the 2015-16 season next August of 1.746 billion bushels, down from the government’s estimated stockpiles of 1.851 billion bushels in 2014-15. Analysts had expected stockpiles next year to total 1.736 billion bushels.
Corn prices were mixed, with spot-month futures falling to a nearly seven-month low due to larger-than-expected production and supply forecasts. Longer-dated futures, however, got a boost in part from the USDA elevating expectations for U.S. corn exports this season.
Some traders don’t place much weight on production estimates this early in the growing season. Farther-dated corn prices also may have perked up after being pressured last week by largely favorable weather in the U.S. Midwest that paved the way for swift spring planting.
Lightly traded May corn futures slipped 1 1/4 cent, or 0.4%, to $3.57 a bushel on the CBOT, the lowest closing price for a front-month contract since Oct. 24. Most-active July contracts gained 1/2 cent, or 0.1%, to $3.61 a bushel.
Wheat prices also were mixed, with longer-dated futures turning lower after the USDA projected larger-than-expected U.S. production in the 2015-16 season and bigger domestic and global stockpiles.
The government said domestic wheat output this year would total 2.087 billion bushels, up 3% from the year prior. Analysts had expected 2.079 billion.
The USDA projected global 2014-15 wheat stockpiles at 201 million metric tons, above analysts’ expectations for 197.4 million. It also said global wheat stocks in 2015-16 would be 203.3 million metric tons, above analysts’ estimate of 194.2 million.
Lightly-traded CBOT May wheat futures rose 3 cents, or 0.6%, to $4.79 1/4 a bushel. Most-active July contracts dipped 1/2 cent, or 0.1%, to $4.80 1/2 a bushel.
Wheat prices last week sank to nearly five-year lows as rain showers in the southern U.S. Great Plains, where much of the nation’s crop is grown, watered crops that earlier had suffered from drought. Competition from rival exporters like Europe and Ukraine also has pressured prices and beefed up domestic inventories of the grain.
