Weather news could not offset higher estimated supplies, and prices for all major crops dipped lower in Chicago trading following the Aug. 10 supply and demand reports.
The United States Department of Agriculture’s World Agricultural Supply and Demand Estimates pushed traders to sell positions with reports of a record U.S. corn crop and increased soybean production estimates.
The optimism of tighter wheat, canola and rapeseed supplies was not enough to offset the price-depressing effects from the corn and soybean reports.
World wheat supplies are estimated in the WASDE to drop by 6.6 million tonnes to 729.63 million, and with half the European drought-impaired wheat crops in the bins, the accuracy of that report is likely reasonably good.
Bruce Burnett of Glacier FarmMedia’s MarketsFarm said the drop in wheat prices, which continued through press time on Aug. 13, is likely unjustified when looking at the market’s fundamentals.
“But the market sentiment has definitely turned negative,” he said.
For more detail on wheat supply and demand, see D’Arce McMillan’s Market Watch column on page 8.
U.S. oilseed production is projected to rise by seven million tonnes to 123 million tonnes, with an average yield of 51.6 bushels per acre on 88.9 million acres. That is up 3.1 bu. per acre over last month’s estimates and 2.5 bu. more than last year’s actual average.
This added to the effects on overall supply caused by last season’s lower ending stocks, and puts American soybean supplies at a record level of more than five billion bu.
The markets responded immediately following the report, moving soybeans lower by five percent on Aug. 10 and by another 1.2 percent in overnight trading and into the morning of Aug. 13.
INTL-FCStone chief commodities economist Arlan Suderman said, “if the (WASDE) corn number had come in closer to what the trade was expecting, or the soybean number had been a little lower, the trade wouldn’t have reacted they way it did.
“I think the big, bearish factor was the soybean number. The trade just wasn’t ready for that, especially when we are in the middle of a trade war,” he said.
Oilseed consumption is expected to increase globally, but this won’t offset the larger production of soy, peanuts and cottonseed.
Rapeseed and canola production are expected to be lower than last year, but Russia and Ukraine are projected to yield more than previously estimated because of favourable conditions for crop maturity.
Overall, global oilseed stocks should rise by 7.5 million tonnes over previous estimates to 108 million this year.
Canola, like wheat, caught the American big-crop flu and headed lower, back toward the high side of the $500 per tonne mark, despite support on Aug. 13 from a lower Canadian dollar.
Burnett said the crisis in Turkey continues to hurt markets by strengthening of the U.S. dollar.
“The trade weighted dollar index is hitting one-year highs,” he said Aug. 13.
“Pressure on the loonie is coming from the U.S. dollar strength and continued threats from the U.S. president regarding the (North American Free Trade Agreement). Canadian dollar September futures are trading at 76.10 US cents,” said Burnett.
Corn may set an American record for production at an average of 178.4 bu. per acre. The USDA Crop Production report from Aug. 10 increases the yield by 4.4 bu. per acre over last month.
While corn use is growing globally, the supplies are rising faster than the disappearance, pushing ending stocks up to an estimated 1.7 billion bu. in the U.S.
However, that is similar to ending stocks in 2010, 2015 and 2016 and down considerably from 2017-18’s projected 2.3 billion bu.
USDA average, seasonal farm-price estimates for 2018-19 show wheat up 10 US cents per bu. in a range from US$4.60 to $5.60. Corn is down 20 cents in the $3.10 to $4.10 range, while soybeans are now off 35 cents from the last report at $8.90 per bu.