USDA cuts crop outlook, prices jump higher

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Published: August 11, 2011

A bullish USDA crop production report and rising equities lifted crop futures, including canola, on Thursday.

November canola closed at $547.60 per tonne, up $6.90.

The Statistics Canada Crop Condition Assessment Program (CCAP), a system that uses satellite images to assess crop condition, has made a preliminary forecast that canola in Western Canada will yield on average 33 bushels per acres. Agriculture Canada’s yield forecast is 32.8 bu. per acre.

CCAP forecasts production of 13.86 million tonnes from 18.5 million acres

Agriculture Canada forecasts production of 13.4 million tonnes based on a harvest of 18 million acres.

Stats Canada’s crop production forecast based on interviews with farmers will be released Aug. 24.

Thursday’s USDA corn estimate at 12.914 billion bu. was one percent smaller than traders expected and the soybean crop, 3.056 billion bu. was four percent below trade expectations.

The corn reduction was due to a lower yield estimate, which dropped by 5.7 bu. to an average of 153 bu. per acre.

The impact of the corn crop downgrade was offset slightly by an increase in the expected corn carryout at the end of the U.S. crop year Aug. 31 to 940 million bu. compared to expectations of 922 million bu. The USDA said recent high prices reduced ethanol and export demand.

However, USDA forecast the carryout at the end of the next crop year will fall to 714 million bu., five percent less than what traders had expected.

The smaller soybean production number was a combination of reduced acreage and yield.

USDA pegged the U.S. soybean yield at 41.4 bu. per acre, down from its previous estimate of 43.4. Some analysts said the reduction, coming relatively early in the 2011 growing season, could indicate smaller plants.

USDA clipped soybean area by 200,000 acres.

USDA also reported on a resurvey of seeded acreage conducted to take account of the wet spring seeding season that prevented planting in some cases.

It said durum acreage was 15 percent less than the earlier forecast and spring wheat was seven percent less.

USDA now puts spring wheat acreage at 12.677 million acres, down from 13.627 million on June 30, a decline of 950,000.

Durum area is 1.398 million, down 300,000 from the June 30 number of 1.698 million.

Spring wheat production was pegged at 522 million bu., down from the average guess of 541 million and durum at 57.1 million bu., off estimates of 61 million.

Wheat futures have also been supported by thoughts that the continuing intense drought in the southern plains will lead to reduced winter wheat seeding.

USDA pegged world wheat production at 672.09 million tonnes, up from the July forecast of 662.42.

Slight decreases in Argentina and the U.S. were more than offset by a big increase in the estimate for the former Soviet Union, which rose to 106.62 million tonnes from 99.50 million in July.

Global wheat stocks at the end of 2011-12 are forecast at 188.87 million tonnes, up from 182.19 million in July, but still down slightly from 191.74 million at the end of 2010-11.

The tight grain stocks and higher prices for feed will likely make livestock producers hesitant to expand herds. Hog and cattle futures rose.

Equities supported crop futures. Stock prices rose on better U.S. employment news.

The number of Americans making an initial claim for unemployment benefits for the first time fell to 395,000 last week, down 7,000 from a week earlier. It’s the first time the number has dropped below 400,000 in four months.

While stocks were up, concerns about the health of France’s banks continued.

Winnipeg (per tonne)

Canola Nov 11        $547.90, up $7.20

Canola Jan 12        $555.80, up $6.90

Canola Mar 12        $562.70, up $8.40

Canola May 12        $566.80, up $8.40

The basis and relative strength index were not available.

Western Barley Oct 11        205, unchanged

Chicago (per bushel)

Soybeans Aug 11        $13.3375, up 33.0 cents

Soybeans Sep 11        $13.2475, up 29.25

Soybeans Nov 11        $13.3175, up 30.25

Corn Sep 11        $7.025, up 24.5

Corn Dec 11        $7.14, up 25.5

Oats Sep 11        $3.44, up 3.75

Oats Dec 11        $3.545, up 3.5

Minneapolis (per bushel)

Spring Wheat Sep 11        $8.625, up 25.25 cents

Spring Wheat Dec 11        $8.665, up 24.0

Spring Wheat Mar 12        $8.7375, up 25.0

Light crude oil nearby futures in New York rose $2.83 to $85.72 US per barrel.

The Canadian dollar at noon was $1.0109 US, up from $1.0091 the previous trading day. The U.S. dollar at noon was 98.92 cents Cdn.

The stronger oil price helped the Toronto Stock Exchange composite index unofficially closed up 340.91 points, or 2.79 percent, at 12,539.80 points.

In a preliminary tally, the Dow Jones industrial average rose 422.84 points, or 3.94 percent, to close, the Standard & Poor’s 500 Index jumped 51.82 points, or 4.62 percent, to close at 1,172.58 and the Nasdaq climbed 111.63 points, or 4.69 percent, to close at 2,492.68.

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