(Wall Street Journal) – U.S. grain prices fell sharply after federal forecasters projected larger-than-expected domestic supplies, owing in part to improved prospects for the wheat crop in the Plains.
Wheat futures declined more than 3%, while corn slid 2%. Soybean prices dropped slightly.
In a monthly report, the U.S. Department of Agriculture boosted its forecast for U.S. wheat production and stockpiles for the season ending in May. The government said late-season rains had bolstered the health of the wheat crop in the central Plains, though some areas have received excessive moisture that could diminish yields.
The USDA estimated that domestic wheat output in the 2015-16 season will total 2.121 billion bushels, topping analysts’ estimates of 2.096 billion. The government said domestic wheat reserves would total 814 million bushels at the end of the season next May, above analyst forecasts of 791 million.
Federal forecasters also said global wheat supplies—already historically high—would rise next season to about 202.4 million metric tons from an estimated 200.4 million tons in 2014-15.
The government is making the case that “rain makes grain,” said Dave Marshall, a farm-marketing adviser at TFCG LLC in Nashville, Ill. Still, he said, “a [harvesting] combine will ultimately tell.”
Wheat futures for July delivery, the front-month contract, declined 18 3/4 cents, or 3.5%, to $5.13 1/2 a bushel at the Chicago Board of Trade.
The USDA estimated that U.S. corn supplies on Aug. 31, the end of the 2014-15 season, will total 1.876 billion bushels, above analysts’ forecasts for 1.858 billion. It cited in part a reduction in its projection for the use of corn in ethanol production.
The government maintained its existing estimates for U.S. corn production this autumn, pegging output at 13.63 billion bushels, lower than analysts’ estimates for 13.651 billion bushels.
The USDA projected larger-than-expected global corn inventories. It said world corn stockpiles at the end of the 2015-16 season are expected to fall to 195.2 million metric tons from 197 million in 2014-15. Analysts had estimated 191.8 million metric tons and 192.4 million metric tons, respectively.
“It is the world production numbers that are the drag” for corn prices, said Kurt Koester, president of Iowa-based grain brokerage AgriSource Inc., pointing to a larger-than-expected increase in Brazilian corn production estimated by the USDA. “That’s more corn on our hands than we thought we had” before the report.
Corn futures for July delivery fell 7 3/4 cents, or 2.1%, to $3.57 1/4 a bushel in Chicago trading.
Soybean prices settled lower after the USDA maintained its estimate for U.S. soybean production, but projected lower-than-expected domestic oilseed reserves for this season and next.
The government pegged soybean output for the 2015-16 season at 3.850 billion bushels, the same as last month’s forecast.
The USDA estimated that U.S. soybean stockpiles at the end of the 2015-16 season will total 475 million bushels, up from estimated inventories of 330 million bushels in the 2014-15 season ending Aug. 31. Analysts had expected stockpiles next year to total 485 million bushels, an increase from their estimate for this year of 342 million.
Globally, the government expects soybean stockpiles at the end of the 2015-16 season to rise to 93.2 million metric tons from 83.7 million in 2014-15.
Soybeans for July delivery slid 2 cents, or 0.2%, to $9.49 1/2 a bushel on the CBOT.
