Big U.S. corn yields surprise market

Winnipeg – An unexpected upward revision to this year’s United States corn yields sent prices dropping Wednesday, and more losses are likely, according to market analysts.

The U.S. Department of Agriculture pegged average corn yields at 181.3 bushels per acre in a report released Sept. 12. That was up by about three bushels per acre from the August report and well above even the top end of trade guesses. Total corn production was raised to 14.827 billion bushels, from 14.586 billion in August. That would be up by about 225 million bushels from 2017/18.

“It’s pretty hard to believe that the corn yield was that high,” said Scott Capinegro, of Barrington Commodity Brokers, pointing to excess moisture and adverse growing conditions in a number of key growing areas. “It’s mind boggling . . . what weather could kill the corn yield?”

Capinegro expected the bearish yield number would likely cause the December corn contract to fall below US$3.50 per bushel within the next few days. The contract settled at US$3.5250 on Sept. 12.

“The yields for corn blew away analysts’ expectations,” added Terry Reilly, of Futures International. “The sheer amount of corn out there… is just bearish,” he said placing a nearby downside target in the December contract of US$3.40 per bushel.

Soybeans moved higher following the USDA report due to the unwinding of spreads with corn, but Capinegro said the bean market was also looking bearish barring any developments on the trade front with China.

The USDA pegged U.S. soybean carryout stocks for 2018/19 at 845 million bushels, which was up from the August estimate of 785 million and well above the 395 million tonne ending stocks for 2017/18.

The USDA pegged soybean yields in the country at 52.8 bushels per acre, which compares with the August estimate of 51.6 bushels per acre and the year-ago level of 49.1 bushels per
acre.

November soybeans touched a fresh contract low of US$8.2125 per bushel at one point during Wednesday’s trading session, but managed to settle at US$8.4000. With the underlying fundamentals looking relatively bearish, “we could test US$8.05 in the beans,” said Reilly.

Wheat futures were also pressured by Wednesday’s USDA report following an upward revision to world wheat stocks. The government agency pegged world wheat carryout at 261.29 million tonnes, which was up by about 2.3 million tonnes from the August estimate and well above average trade estimates that had predicted a downward revision.

The USDA raised its estimate for Russian wheat production by about three million tonnes, “which threw a nail in the coffin,” of the wheat market, according to Reilly.

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