U.S. Corn Prices Drop as Domestic Stockpiles Rise

October 1st, 2015

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Category: Grains, Oilseeds

cornfield450x299(Wall Street Journal) – U.S. corn prices fell Wednesday after an Agriculture Department report showed large domestic stockpiles ahead of what is expected to be another bumper harvest.

Soybean and wheat futures settled at multiweek highs, supported by lower-than-expected supply estimates.

Corn prices dropped after the USDA pegged U.S. inventories on Sept. 1 at 1.731 billion bushels, up from 1.232 billion a year earlier. The figure largely met the average analyst estimate of 1.735 billion bushels in a Wall Street Journal survey.

Both U.S. corn and soybean supplies swelled after farmers harvested record crops last year, collecting 14.2 billion bushels of corn and 3.93 billion bushels of soybeans. This year, largely favorable weather graced the Midwest, raising expectations that growers will again bring in big crops. That has prompted worry among some traders and industry watchers that domestic stockpiles could outstrip demand for the crops.

Corn for December delivery declined 1 1/4 cents, or 0.3%, to $3.87 3/4 a bushel at the Chicago Board of Trade.

Commodities analyst Jim Gerlach said the government estimates didn’t alter the fundamental problem confronting farmers and grain companies: U.S. corn continues to be priced too high on global markets. U.S. export demand is buffeted by a strong American dollar, slowing emerging-market growth and plentiful global grain supplies, said Mr. Gerlach, president of brokerage A/C Trading Co. in Fowler, Ind.

“That makes it difficult to move prices higher in the global scope of things,” Mr. Gerlach said. “This is the time of year we ought to be dominating exports, and we’re not.”

U.S. soybean prices rose to a one-month high, reversing losses posted earlier in the day. Federal forecasters reported smaller-than-expected stockpiles of the oilseeds, though reserves were up sharply from last year.

Soybean stockpiles totaled 191 million bushels on Sept. 1, more than double the 92 million bushels last year. Analysts surveyed by The Wall Street Journal anticipated the government would raise stockpiles to 204 million bushels.

The lower-than-expected projection for soybean supplies stems largely from the USDA’s move to cut its estimate of last year’s harvest. It pegged 2014 production at 3.93 billion bushels, down 41.7 million bushels from its earlier estimate of 3.97 billion.

Soybean futures for November delivery gained 7 3/4 cents, or 0.9%, to $8.92 a bushel in Chicago trading, the highest settlement since Aug. 31.

Soybean traders by day’s end turned their attention from the USDA report to questions about this year’s yields. Though the government has forecast a record crop, analysts are uncertain how yields may have been affected by heavy rainfall, which swamped some fields early in the growing season.

“The reality is we’re still at the start of harvest,” said Dave Marshall, a farm-marketing adviser at TCFG LLC in Nashville, Ill. He said that while soybean yields in many regions have been better-than-expected, later-planted crops that have yet to be collected may return less-stellar results. “Now we wait to see what the combine yield monitors tell us.”

Wheat prices climbed to the highest level in more than seven weeks after the USDA’s stockpile and production estimates came in below analysts’ expectations.

U.S. wheat inventories as of Sept. 1 totaled 2.089 billion bushels, up from 1.907 billion a year earlier, according to the USDA. Analysts had forecast 2.165 billion bushels.

In a separate report Wednesday, the USDA projected 2015 domestic wheat production of 2.052 billion bushels, down from last month’s forecast of 2.136 billion and lower than analysts’ expectations for 2.139 billion.

Production of hard-red winter wheat, the type used to bake bread, totaled 827 million bushels, while soft-red winter wheat, used in cookies and cakes, totaled 359 million bushels, the government estimated. Growers harvested 184 million bushels of white winter wheat, the USDA said.

December wheat futures jumped 9 cents, or 1.8%, to $5.12 3/4 a bushel in Chicago trading, the highest closing price since Aug. 10.

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