Corn futures enjoyed a boost from the monthly United States Department of Agriculture report released last week and its price strength spilled over into other crops.
The USDA cut its U.S. and world corn production and ending stocks outlooks from its August report.
It lowered its U.S. corn production forecast to 345.07 million tonnes, down about 2.5 million.
The world crop forecast fell 7.5 million tonnes to 978.1 million. In addition to the cut in U.S. production, the other big reduction was in Europe, where production fell 4.25 million tonnes.
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USDA now sees world corn 2015-16 ending stocks at 189.7 million tonnes, down about 5.5 million from last month and down about 7.5 million from the 2014-15 year end. The change was not earth shattering, but it was enough to help December corn futures rally about five percent by the time this column was written Sept. 14.
Because corn is the foundation of grain prices, its rally helped lift wheat even though the USDA’s numbers for that crop were negative.
The USDA lifted its global wheat production forecast by about five million tonnes from the August report to 156.24 million. Crop year ending stocks climbed by a similar amount to 226.56 million tonnes
That is up about 15 million tonnes over 2014-15 year end stocks.
The wheat number increased mostly because a much larger than expected European wheat crop. Winter wheat was harvested before this summer’s heat wave could damage it, but the spring-seeded corn crop was hurt.
It is shaping up to be another year of intense competition in the global wheat market that will keep downward pressure on prices.
The U.S., Europe, Black Sea region now have most of their wheat in the bin and Canada is well into harvest.
Australia’s harvest is a few weeks away but even with a strong El Nino in place, its wheat crop is doing well. Its official forecast, also out last week, is for 25.3 million tonnes, up from 23.7 million last year.
It expects its canola crop will be 3.1 million tonnes, better than was expected earlier this summer but still down nine percent from last year due to a 13 percent reduction in seeded area.
The USDA did not cut U.S. soybean yields and production, surprising traders who had expected some trimming. But the numbers did not spark a price sell off. The trade appears to believe that the USDA will eventually make the cuts in its October report.
But the recent gains in oilseed markets might be short lived as traders will soon increase their focus on South American growing prospects, and they look bearish for prices.
Even though soybean prices are below the cost of production of some American producers, Brazil is expected to increase its acreage this fall by 2.3 percent to 80 million acres. The crop is not seeded yet but local forecaster Celeres expects production to increase to 97.1 million tonnes.
Brazil’s commodity heavy economy is in recession, its stock prices are falling, its bonds have been downgraded to junk and its currency, the real, is plummeting, down about 45 percent since the start of the year.
As the real falls it lifts the soybean price in the local currency helping reinforce the idea that seeded acreage will rise.
The El Nino, which is expected to continue through the winter, normally delivers good rainfall to South America’s soy fields raising the likelihood of another record crop that will keep a lid on oilseed prices, including canola.
