World grain supplies will be much healthier next year than previously forecast, the U.S. government said in a report that could put further pressure on crop prices that have already tumbled from their peaks.
Apart from an unexpectedly deep cut to its forecast of U.S. soybean stockpiles, the U.S. Department of Agriculture’s monthly report made surprisingly large upward revisions to global inventories of nearly every type of grain, a welcome respite for consumers after over a year of steadily thinning supplies.
A record rice crop in India, higher wheat supplies from Kazakhstan and a record corn harvest in China all contributed to an overall more upbeat assessment of world supplies, although traders warned that conditions may yet tighten.
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“Global grain stocks are incredibly high relative to the previous month — that’s the most bearish thing,” said Terry Reilly, analyst for Citigroup.
Wheat futures fell five per cent at the Chicago Board of Trade (CBOT), pulled down by larger U.S. and world supplies. Corn was down 0.5 per cent at the end of the day while soybeans rose slightly because of tighter U.S. supplies.
A record 182 million-tonne corn harvest in China — up two per cent from its September forecast — would help meet higher feed demand, the USDA said, maintaining an estimate that China would import two million tonnes of corn in the marketing year that ends next September.
That figure appeared likely to be understated, however, after news on Wednesday that Sinograin, which manages China’s government reserves, had bought 1.5 million tonnes of corn and more than 900,000 tonnes of soybeans.
U.S. corn and soybean crops were shaved by one per cent, as expected by traders, but market players were surprised by a tight outlook for soybeans. Supplies would be thin for the fifth year in a row with ending stocks cut by three per cent.
China punch
China is the world’s largest importer of soybeans and cotton and is expected to become a major corn buyer. The U.S. Grains Council, a trade group, says the China corn crop is smaller than the USDA projects, so China will need up to 10 million tonnes of imports.
Near-perfect summer weather boosted Kazakhstan’s wheat crop to 19 million tonnes, up 19 per cent from the month-ago estimate, the USDA said, and double last year’s drought-cut harvest.
With the harvest in full swing, the USDA forecast the U.S. corn crop would be the fourth-largest on record, down one per cent from its September estimate due to a smaller harvest area. In a survey, traders had expected the corn estimate to drop one per cent.
The USDA held yields at the same rate as September — 148.1 bushels an acre, the lowest since 2005. It said soybean yields would be the second-lowest since 2003.
The U.S. soybean stockpile was forecast at 160 million bushels at the end of 2011-12, 12 per cent below what traders expected. The USDA said the stockpile at the start of the year was less than expected and the crop would be slightly smaller.
As expected, the USDA lowered its forecast of the U.S. soybean crop by one per cent for the sixth-largest crop on record, down one notch, like corn, in a month. Yields are down and less acreage is being harvested.
“Corn and soybean prices have declined sharply over the last month,” said Scott Irwin, a University of Illinois agricultural economist.
“The USDA production reports suggest that the part of the decline based on ‘better than expected’ corn and soybean yields may have been overdone. The supply side of U.S. markets for the current marketing year is basically set.”
U.S. wheat stocks were forecast at 837 million bushels, 14 per cent larger than traders expected. The USDA said less wheat was being used in livestock feed than expected and exports were lagging.
