CBOT weekly outlook: Big U.S. corn yields surprise market

(USDA.gov via Flickr)

CNS Canada — An unexpected upward revision to this year’s U.S. corn yields sent prices dropping Wednesday, and more losses are likely, according to market analysts.

The U.S. Department of Agriculture, in a report released Wednesday, pegged average corn yields at 181.3 bushels per acre — up by about three bushels per acre from the August report and well above even the top end of trade guesses.

Total corn production was raised to 14.827 billion bushels, from 14.586 billion in August. That would be up by about 225 million bushels from 2017-18.

“It’s pretty hard to believe that the corn yield was that high,” said Scott Capinegro, of Barrington Commodity Brokers, pointing to excess moisture and adverse growing conditions in a number of key growing areas. “It’s mind-boggling… what weather could kill the corn yield?”

Capinegro expected the bearish yield number would likely cause the December corn contract to fall below $3.50 per bushel within the next few days (all figures US$). The contract settled Wednesday at $3.525.

“The yields for corn blew away analysts’ expectations,” said Terry Reilly of Futures International. “The sheer amount of corn out there… is just bearish,” he said placing a nearby downside target in the December contract of $3.40 per bushel.

Soybeans moved higher following the USDA report due to the unwinding of spreads with corn, but Capinegro said the bean market was also looking bearish barring any developments on the trade front with China.

USDA pegged U.S. soybean carryout stocks for 2018-19 at 845 million bushels, which was up from the August estimate of 785 million and well above the 395 million-tonne ending stocks for 2017-18.

USDA pegged soybean yields in the country at 52.8 bushels per acre, which compares with the August estimate of 51.6 bushels per acre and the year-ago level of 49.1 bushels per acre.

November soybeans touched a fresh contract low of $8.2125 per bushel at one point during Wednesday’s trading session, but managed to settle at $8.40. With the underlying fundamentals looking relatively bearish, “we could test $8.05 in the beans,” said Reilly.

Wheat futures were also pressured by Wednesday’s USDA report following an upward revision to world wheat stocks. The government agency pegged world wheat carryout at 261.29 million tonnes, up by about 2.3 million from the August estimate and well above average trade estimates that had predicted a downward revision.

USDA raised its estimate for Russian wheat production by about three million tonnes, “which threw a nail in the coffin” of the wheat market, according to Reilly.

— Phil Franz-Warkentin writes for Commodity News Service Canada, a Glacier FarmMedia company specializing in grain and commodity market reporting. Follow him at @PhilFW on Twitter.

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