Corn, soybeans and wheat futures posted double-digit losses after USDA increased its production forecasts for the three crops this year and raised corn ending stocks.
The increases in corn ending stocks to 2.370 billion this year and to 2.325 billion next year were more than expected for both the current crop year and next year.
USDA now expects the 2017 corn harvest at 14.25 billion bushels versus its previous 14.065 billion. It cut 2016/207 feed use 75 million to 5.425 billion bushels but raised 2017/2018 feed use by 50 million to 5.475 billion. For old crop it left exports and industrial use, including ethanol, unchanged.
Soybean ending stocks were lowered for both crop years with 2017/2018 stocks trimmed to 460 million bushels largely because of smaller beginning stocks. Current crop year ending stocks dropped to 410 million from June’s 450 million as USDA raised its export forecast. Year-to-date export sales had outpaced USDA’s previous forecast.
Spring wheat’s projected production of 423 million bushels is down 21% from a year ago, which was near the middle of the wide range of trade forecasts. The reduction was made due to fewer acres and expected lower yields.
Winter wheat production was raised 2% from the June report to 1.28 billion after USDA raised the average yield to 49.7 bushels per acre, the second highest yield on record if realized.
“Two bearish surprises stand out in today’s report. First, USDA cut its estimate of old crop feed usage more than expected, carrying over more of the higher June 1 stocks to the end of the marketing year than we anticipated,” said Bryce Knorr, Farm Futures senior grain analyst. “Then, the agency made only a token increase to new-crop demand despite the extra bushels from 2016 and larger 2017 acreage.”
The second bearish surprise was the increase in winter wheat production, which offset set any bullish influence from the lower spring wheat and durum production numbers, said Knorr.
“USDA’s yield estimates for spring wheat closely match the ones we came up with two weeks ago. Crop ratings dropped significantly since then, perhaps taking another 20 million to 40 million bushels off the crop,” said Knorr.
“Global stocks of all three commodities remain burdensome, which puts the burden for rallies squarely on weather,” said Knorr. “Forecasts shifted wetter in a recent outlook, and if that holds, expect a sell off to continue.”
The latest 6- to 10-day forecast, July 17-21, increases rain chances for North Dakota, but keeps hot conditions there and in the Midwest then.
“December corn futures are flashing sell signals that provide warnings of tops in summer grain markets. They include Tuesday’s key reversal lower with divergence from RSI and today’s violation of the trend-line off lows from the past two weeks’ rally,” said Knorr.