Big crop potential lowers prices

With the best Midwest crop conditions in about 20 years and large seeded areas of key crops, soybean and corn prices plunged last week.

Between the close July 3 and July 11, November soybeans fell 5.2 percent, December corn fell 7.3 percent and December Minneapolis spring wheat fell 6.2 percent.

A monthly supply and demand forecast from the United States Department of Agriculture on July 11 predicted a record-shattering soybean crop and a near record corn crop, with the warning that if weather continued conducive to crop growth, the yield forecast could rise.

The market expected the news but grain prices still fell.

“The report confirms a bearish sentiment. It does not bring anything new to the table really,” said Sterling Smith, futures specialist at CitiGroup.

The USDA projected 2014-15 U.S. corn ending stocks at 1.801 billion bushels, which was above analysts’ average forecast.

USDA forecast the corn crop at almost 13.9 billion bu., not much below the record high of 13.925 billion bu. harvested last year.

The USDA lifted its forecast for the U.S. soybean harvest to a record 3.8 billion bu., up 4.5 percent from the June report and up 0.7 percent from the trade’s expectations. The crop is now predicted to be 15.5 percent larger than the 2013 crop.

U.S. soybean ending stocks for 2014-15 were pegged at 415 million bu., close to trade expectations. If realized, that would be the highest since 2006-07.

The USDA will do field surveys of corn and soybeans in August. Pending that report, it left projected yields unchanged from its June estimate, but suggested higher yields could be at hand if the weather co-operates.

“Favourable early July crop conditions and weather support an outlook for record yields across most of the corn belt. However, for much of the crop, the critical pollination period will be during middle and late July,” the USDA said.

“Leaving the yields unchanged tells you that this can get more bearish if weather is favourable,” said Don Roose, analyst at U.S. Commodities in West Des Moines, Iowa.

For now, most of the corn belt has ample moisture to support crop development.

“This situation is bearish for soybeans and will become bearish for corn when USDA recognizes the yield changes,” said Allendale Inc. analyst Rich Nelson.

Projected season average prices for wheat, corn and soybeans were all lowered as the USDA caught up with the sharp price drops seen in markets recently.

World soybean ending stocks will jump to 85.3 million tonnes in 2014-15 from 67.2 million in the current season, the USDA said.

Projected imports by China were raised by one million tonnes to 73 million, accounting for fully two-thirds of global demand.

The USDA increased its estimates for world corn and coarse grain ending stocks for 2013-14 and 2014-15 substantially as well.

It lifted China’s corn crop by two million tonnes to 222 million, keeping China’s imports for the 2014-15 season at a slim three million tonnes.

The USDA increased its outlook for global wheat production to 705.2 million tonnes from 701.6 million. Year-end 2014-15 stocks rose to 189.5 million tonnes from 188.6 million in the last report. The 2013-14 ending stocks are 184.29 million.

USDA sees its own wheat crop at 54.21 million tonnes, with increases in spring wheat more than offsetting a smaller hard red winter wheat estimate.

The USDA’s domestic durum estimate is 59.6 million bu., down four percent from 2013, but almost spot on the trade expectation of 60 million bu.

Internationally, wheat increases in the European Union, Ukraine and Australia more than offset declines in Canada and Kazakhstan.

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