Forexpros – U.S. grain futures came under pressure during European morning hours on Monday, with corn extending losses from the previous session amid concerns high prices may be hurting global demand for U.S. supplies.
In its Supply & Demand Estimate Report published Friday, the U.S. Department of Agriculture lowered its forecast for near-term U.S. corn and soybean supplies, but predicted lower exports, as a recent rally in grain prices dented global demand for U.S. supplies.
Corn prices have surged nearly 58% since mid-June, wheat futures soared approximately 44%, while soy prices added 26%, amid fears over the impact of drought-like conditions on crops in the U.S. Midwest and Great Plains-region.
The National Oceanic and Atmospheric Administration deemed the current drought as the worst since 1956, while the National Climatic Data Center said that last month was the warmest July since 1936.
However, investors cashed out of the market amid concerns high prices may be hurting global demand for U.S. grains.
On the Chicago Mercantile Exchange, corn futures for September delivery traded at USD7.9400 a bushel, falling 1.3%. Earlier in the day, prices declined by as much as 1.5% to trade at a session low of USD7.8875 a bushel.
Front-month prices touched an all-time high of USD8.4238 a bushel on Friday.
Corn prices added to Friday’s 2% drop after the USDA cut its estimates of overall demand for U.S. corn by 12% from a month earlier, due to higher prices and increased competition from South American exporters.
The USDA also forecast the lowest-yielding crop since 1995. The department estimated that U.S. corn production will total 10.779 billion bushels in the current marketing year, down from a previous forecast of 12.97 billion.
The agency also cut its average corn-yield estimate to 123.4 bushels per acre, down from July’s forecast of 146 bushels per acre.
The U.S. produced 38% of the world’s corn last year, making it the both world’s largest corn producing nation and the largest exporter of the grain.
Elsewhere, soybeans futures for September delivery traded at USD16.9950 a bushel, shedding 0.75%. Prices fell by as much as 0.85% earlier to trade at a daily low of USD16.9800 a bushel.
Front-month prices rallied to a two-week high of USD16.9887 a bushel on Friday.
Soy futures have gained sharply in recent weeks, as the same hot, dry weather that boosted corn was seen benefitting soy futures as well. Soybeans are grown in many of the same regions across the U.S. as corn.
The USDA slashed its average soybean-yield estimate to 36.1 bushels per acre, the lowest average yield since 2003 and down from July’s forecast of 40.5 bushels per acre.
U.S. soybean production was now expected to total 2.692 billion bushels in the current marketing year, below market expectations for 2.817 billion bushels.
Global soybean supplies are already on the decline, as severe drought conditions earlier in the year in major South American growers Brazil and Argentina damaged crops in the region.
Meanwhile, wheat for September delivery traded at USD8.7375 a bushel, tumbling 2.1%. The September contract fell by as much as 2.15% earlier to hit a session low of USD8.6750, the lowest since August 3.
Wheat futures extended losses from the previous session after the USDA raised its average wheat-yield estimate to a record 48 bushels per acre. The agency also forecast a 1% increase in wheat production from its July forecast.
Prices came under additional pressure by smaller-than-expected decline in wheat production from the Black Sea-region.
USDA cut wheat production in the former Soviet Union states by 5.6 million tonnes to 82.96 million, and dropped Russian output by 6 million tonnes to 43 million.
Corn is the biggest U.S. crop, valued at USD66.7 billion in 2010, followed by soybeans at USD38.9 billion, government figures show. Wheat was fourth at USD13 billion, behind hay.
Grain traders were awaiting the release of the USDA’s weekly crop progress report due out after Monday’s closing bell on the CBOT to gauge how ongoing drought conditions have impacted yields and damaged crops.
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