Saturday October 25, 2014

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U.S. corn at six-week low ahead of USDA reports

Crop estimates to be updated Wednesday; U.S. harvest advances

U.S. corn futures sank to a six-week low on Monday as traders moved out of bullish bets ahead of U.S. government reports that will give updates on crop damage from the worst U.S. drought in half a century.

The U.S. Department of Agriculture's monthly supply-demand and crop production reports on Wednesday could provide insight into whether this summer's rally in corn and soybean prices to record highs can run longer.

With people around the world worried about higher food prices, market watchers will scrutinize the USDA's yield and production estimates.

Traders said there was a better chance for a bullish surprise for soybean futures than corn in the reports because they felt they already had a good handle on damage to the corn crop.

"There's a little more fear for the longs in the market that this report is not going to give them anything that they want for corn, but it could for beans," said Tim Hannagan, grain specialist for Alpari, referring to traders who are betting on higher grain prices.

Chicago Board of Trade (CBOT) new-crop December corn tumbled two per cent to $7.83-1/4 a bushel. November soy lost one per cent to $17.18-1/2 a bushel, while December wheat slid 1.7 per cent to $8.89-3/4 a bushel (all figures US$).

Commodity funds sold an estimated net 8,000 contracts of corn futures on Monday, trade sources said. They sold 3,000 wheat and 6,000 soybeans.

Soybeans in focus

Private analysts on average predicted the USDA will trim its soybean crop forecast to 2.657 billion bushels from 2.692 billion in August, according to a Reuters poll. However, there is uncertainty as some expect a slight increase because of Midwest rains last month.

CBOT soybeans set a record high of $17.94-3/4 on Sept. 4 and were firmly on the uptrend until brokerage FCStone raised its soybean yield estimate on Thursday to 36.7 bushels per acre from its August forecast of 36.2 bushels.

Some experts such as FCStone saw periodic rains in August in the northern and eastern parts of the Midwest farm belt as helping the soybean crop, which typically comes to maturity that month after the corn crop pollinates in July.

Germany's Commerzbank said in a daily note that it believed the market had priced in a soybean crop of 2.6 billion bushels. A larger-than-expected harvest estimate could pressure prices, according to the note.

"The world is going to react to the soybean number," said Jerry Gidel, analyst for Rice Dairy.

Still, analysts were looking for a drop in USDA's corn output estimate to 10.380 billion bushels from its August forecast of 10.779 billion, according to the Reuters poll.

U.S. harvest

The USDA, in a separate report on Monday, said the corn harvest was 15 per cent complete, above the five-year average of five per cent. Analysts surveyed by Reuters had expected the harvest to be 17 per cent complete.

The soybean harvest was four per cent complete, above the five-year average of two per cent and analysts' expectations for three per cent.

Traders also were keeping an eye on wheat harvests in the Black Sea region, which has been hit by dryness. Wheat futures took a breather after rising the previous two sessions on concerns about tightening supplies in Russia and Australia.

Russia's government is trying to cope with a drought that has slashed grain yields by more than a quarter. Officials are promising no grain export limits, yet industry experts believe they could occur as soon as October.

-- Tom Polansek
reports on the agriculture sector from Chicago for Reuters. Additional reporting for Reuters by Naveen Thukral in Singapore, Ivana Sekularac in Amsterdam and Valerie Parent in Paris.


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