Corn, Soybeans Consolidate After Bumper Harvest Forecasts
By Benjamin Parkin
Corn and soybean futures inched higher on Friday, recovering from unexpected forecasts for bumper corn-and-soybean harvests this year.
The U.S. Department of Agriculture surprised traders on Thursday by raising its soybean yield estimate to 49.4 bushels per acre and forecasting a higher-than-expected corn yield at 169.5 bushels per acre.
Many were caught off guard by the agency's estimates, coming amid ongoing concerns about the weather this growing season. Hot and dry conditions have hampered crop growth in key states like the Dakotas and Iowa in recent weeks, and many analysts expected the USDA to reflect those difficulties with lower forecasts.
Still, some expressed skepticism over the figures, which would produce a record soybean harvest of nearly 4.4 billion bushels and a formidably large corn bounty of 14.2 billion bushels.
Both corn and soybean prices fell over 3% to multiweek lows after Thursday's report, only to climb higher overnight and Friday as traders consolidated their positions.
"The smart money realizes that we're only in the second week of August," said Virginia McGathey, a grain options trader at the Chicago Board of Trade. "Until the harvest comes in, because there are so many unknowns in the season, the numbers aren't going to be the numbers until we see them."
Corn futures for September rose 1% to $3.60 3/4 a bushel at the Chicago Board of Trade on Friday, while September soybeans climbed 0.5% to $9.38 1/4 a bushel.
Some external factors also supported corn and soybean prices. The USDA said that private exporters reported sales of 120,000 metric tons of soybeans to China for delivery in 2016-17 and 2017-18.
Meanwhile, a lower dollar and higher crude oil prices also helped the recovery, easing exports and helping money flow into the commodity sector.
Wheat futures, however, were sharply lower, extending Thursday's post-report selloff. While the USDA cut its spring wheat production estimate amid a drought in the northern Plains, the figure was still well above expectations. The agency also forecast higher-than-expected domestic and global wheat stockpiles in 2017-18.
September spring wheat futures at the Minneapolis Grain Exchange dropped 4.2% to $6.74 a bushel, falling to the lowest point since late June. CBOT September Chicago wheat fell 0.3% to $4.39 1/4 a bushel.
Looming concern over geopolitical rumblings between the U.S. and North Korea increased pressure on agricultural commodity markets, analysts said.
"No one likes uncertainty and when you throw in an element that contains radioactivity and the possibility of nuclear war, no one should feel comfortable," said Dan Hueber, manager of the Hueber Report.
Write to Benjamin Parkin at [email protected]