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Grains mixed as attention turns to USDA

10/08/2012 @ 3:53pm

U.S. grain and soybean futures finished mixed Monday, as traders took a conservative approach ahead of Thursday's government forecasts for crop supplies and demand.

Trading volumes were light as market participants adjusted positions to reduce risk ahead of the U.S. Department of Agriculture's monthly crop report, which will shed light on the impact of this summer's severe drought on crops.

Wheat futures managed to end higher despite weakness in world stock markets and in many commodities after the World Bank cut its economic-growth projections for China.

Corn prices fell 0.8% and soybeans slipped 0.03%.

Wheat prices may have gotten a boost Monday from traders factoring into futures their expectations for tighter wheat inventories in Thursday's crop report, said Ken Morrison, St. Louis-based publisher of the Morrison On The Markets online newsletter. He noted that the USDA on Sept. 28 suggested that more wheat than previously expected has been going toward animal feed.

"The trend for wheat supplies in the U.S. looks like they could be headed modestly lower," Mr. Morrison said.

Wheat also climbed on concerns about dry weather threatening world wheat production. Traders are focused on dryness in western Australia, where estimates for wheat production and exports have fallen as the country's crop has developed.

Meanwhile, recent rains have somewhat eased dryness in the U.S. southern Great Plains, but soils there remain parched after the country's worst drought in decades, posing a risk for the new winter-wheat crop now being planted in the region.

December wheat futures ended up 3 1/2 cents, or 0.4%, to $8.61 a bushel at the Chicago Board of Trade. Kansas City Board of Trade December wheat rose 4 cents, or 0.5%, to $8.82 3/4 a bushel. MGEX December wheat finished up 5 cents or 0.5%, at $9.24 1/2 a bushel.

Soybeans continued to be pressured by anecdotal reports suggesting that yields won't be as poor as once feared due to the drought.

Analysts on average expect the Department of Agriculture to raise its estimate for domestic soybean production this year by 5.2% and to cut its corn production estimate by 1.2%, according to a poll by Dow Jones Newswires.

The trade is factoring in the realization that the USDA could make major changes to their projections for the balance between supply and demand for both markets, said Rich Nelson, director of research at brokerage and advisory firm Allendale Inc. in McHenry, Ill.

There is a lot of uncertainty surrounding the reports and how USDA will report demand in the face of production potential, Mr. Nelson added.

Chicago Board of Trade soybeans for November delivery fell 1/2 cent, or 0.03%, to $15.51 a bushel.

Corn prices were hurt by traders reducing risk ahead of the USDA report. Corn for December delivery dropped 6 cents or 0.8% to $7.42 a bushel.

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