An unexpected cut in wheat carryout sent prices higher on Friday, with futures posting double digit gains in Chicago.
USDA's February Supply and Demand trimmed 25 million bushels of projected June 1 inventories. The agency said wheat feeding should be more than expected, because weaker cash prices gave it an edge over corn. Traders had been looking for a small increase in carryout due to weak exports. Instead, USDA lowered its forecast to 691 million bushels, compared to 716 million in January.
Wheat moved higher on the news, adding to gains it enjoyed before the report as traders unwound spreads with soybeans. That action added pressure to beans, even though USDA cut its forecast of soybean carryout by 10 million bushels to 125 million, a little more than the trade expected. USDA said crush would be stronger than previously forecast, but made no changes to its forecast for exports, despite continued strong sales and shipments.
Losses in beans accelerated as traders digested the report, with March down more than 14 cents. USDA raised its forecast for world carryout by 25 million bushels, more than expected. The agency increased its forecast for Brazilian production, but didn't cut output in Argentina nearly as much as some local estimates.
Corn also benefit from unwinding of bean spreads, posting modest gains after the report. USDA raised its forecast for 2012 carryout by 30 million bushels to 620 million. Exports were cut 50 million bushels, as we expected, but use of corn for sweeteners and starch went up 20 million. As expected, the agency made no changes to its forecast for feed usage, which may not be adjusted until after release of the March 1 grain stocks data at the end of next month.
World corn carryout jumped 80 million bushels; the trade was looking for a small decrease, which appeared to weigh on the market as the morning wore on. USDA said increased production in Brazil, Mexico, India and Ukraine more than offset a reduction for Argentina.
USDA made only a minor change to its estimate of world wheat ending stocks, though the trade expected a cut.
Download the full USDA WASDE report below.