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Soybeans, Grains Plunge After USDA Raises Production Forecasts

Favorable weather leads to increased output projection.

Soybean and grain futures plunged on Friday after the U.S. Department of Agriculture raised its outlook for yield and production for both corn and soybeans beyond expectations in its monthly World Agricultural Supply and Demand Estimates (WASDE) report.

Corn output is pegged at 14.586 billion bushels on yields of 178.4 bushels an acre vs. estimates from Reuters for 14.411 billion bushels and yields of 176.2 bushels an acre. The USDA last month forecast output of 14.23 billion bushels on yield of 174 bushels an acre. 

Stockpiles of the grain in the 2018-2019 marketing year that starts on September 1, meanwhile, are expected to come in at 1.684 billion bushels vs. forecasts for 1.636 billion bushels. The agency last month said it expected stocks at the end of the year at 1.552 billion bushels.

Soybean production is seen at 4.586 billion bushels on yields of 51.6 bushels an acre, compared with analyst projections of 4.407 billion bushels on yields of 49.6 bushels an acre.

In July, the government estimated output at 4.31 billion bushels and 48.5 bushels an acre. Inventories are pegged at 785 million bushels, the USDA said. Analysts had expected 638 million bushels, and the USDA in July forecast 580 million bushels would be in storage on August 31, 2019.

Soybeans dropped 43¼¢ to $8.60¾ a bushel on the Chicago Board of Trade. Soymeal lost $12 to $322.90 a short ton and soy oil dropped 0.49¢ to 28.39¢ a pound.

Corn futures for december delivery lost 11½¢ to $3.71¼ a bushel on Friday.

Wheat for September delivery plunged 18¢ to $5.46½ a bushel while Kansas City fugures dropped 19¾¢ to $5.84½ a bushel.

Brian Grossman, a market strategist at Zaner Financial Services in Chicago, had correctly predicted the USDA would increase its projections beyond consensus partly due to weather and partly due to the way the government handles its surveys. He said the USDA doesn’t factor in weight at this point.  

Still, he said, more than 178 bushels an acre for corn is a “strong” number. The lofty figures released by the government, especially for beans, are going to make life difficult for market-watchers, Grossman said. 

“The soybean yield coming in way higher than expected – that’s going to be a tough pill for this market to swallow,” he said. “Ending stocks above 700 million bushels is going to be something this market may choke on.”

Wheat stockpiles at the end of the 2018-2019 marketing year that ends on May 31 are seen at 935 million bushels. That compares with forecasts for 961 million bushels and last month’s estimate for 985 million. 

The USDA numbers, along with some production issues in Europe, the Black Sea region, and Australia where it’s been extremely hot and dry in recent weeks, could underpin prices of the grain. Still, Grossman said, investors shouldn’t rely on wheat to be the leader to the upside.

“It’s hard for anything to dance when wheat is our cheerleader,” he said. 

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