Forexpros – U.S. grain futures ended the week sharply lower on Friday, with wheat and soybean prices falling to multi-month lows after the U.S. Department of Agriculture forecast record global production of corn and wheat and revised down its outlook for U.S. soybean exports.
On the Chicago Mercantile Exchange, corn futures for March delivery traded at USD5.9338 per bushel by close of trade on Friday, dropping 1.47% over the week, the fifth consecutive weekly decline.
Agricultural commodities shrugged off developments surrounding the sovereign debt crisis in the euro zone, with traders focusing on market fundamentals instead.
In its monthly World Agricultural Supply and Demand Estimates report, the USDA said global corn production will hit an all-time high of 867.5 million tons in the 2011-12 marketing season that runs from September to August.
Global ending stocks of corn were also raised to 127.19 million metric tons, up from 121.57 million last month and above expectations of 122.13 million tons.
The USDA left its forecast for corn exports unchanged at 1.6 billion bushels, while adding that domestic demand for the grain was slightly lower-than-expected.
China’s corn crop was revised up by 4% from November’s estimate to 191.75 million tons. The upbeat crop outlook in China, which is the world’s second biggest consumer of the grain, added to worries that the country would import less corn from the U.S. and increase its reliance on domestic supplies.
Elsewhere on the Chicago Board of Trade, wheat for March delivery tumbled 3.32% over the week to settle at USD5.9550 a bushel on Friday. Earlier in the day, prices fell to USD5.8375 a bushel, the lowest since July 27, 2010.
The USDA increased its world wheat production forecast by 0.8% from its November outlook to a record 689 million tons for the current crop year, which runs from April to May.
Global wheat ending stocks for the 2011-12 season were forecast at 208.52 million metric tons, the highest since the 2001-02 season, above expectations for 203.03 million tons.
The USDA also cut its forecast for U.S. wheat exports to 925 million bushels, down 5% from November’s estimate, citing “larger supplies in several major exporting countries and relatively strong domestic prices.”
Meanwhile, soybeans for January delivery slumped 2.29% on the week to settle at USD11.0562 a bushel by close of trade Friday. Earlier in the day, prices declined to USD11.0038 a bushel, the lowest since October 8, 2010.
Soybean prices came under pressure after the USDA reduced its forecast for U.S. soybean exports to 1.3 billion bushels for the current crop year, a 25-million-bushel drop from its November projection.
The downward revision reflected “the slow pace of shipments and outstanding sales through November, and strong export competition from South America.”
According to the report, Brazil was now expected to export 38.5 million metric tons of soybeans in the 2011-12 season, up from last month’s prediction of 38 million tons. Brazil is the world’s second largest soy exporter, trailing only the U.S.
The USDA said that U.S. ending stocks of the grain will rise to a five-year high of 230 million bushels, up from November’s estimate of 195 million bushels.
The agency also reduced its average price forecasts for all three commodities. Soybeans will average USD11.70 a bushel in the current marketing year, down from USD12.60 estimated in November. The outlook for corn was cut 4.5% to USD6.40, while wheat futures were expected to average USD7.30 a bushel, down 1.4% from a previous estimate.
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.
In the week ahead, investors will be keeping a close eye on the borrowing costs of troubled euro zone nations, as a rise in bond yields could prompt a rating cut after Standard & Poor’s warned that it may carry out a mass downgrade of 15 euro zone members, including Germany, France, Italy and Spain.
Meanwhile, the Federal Reserve’s policy setting meeting on Tuesday will also be in focus, as concerns over the impact of the euro zone’s financial crisis on global growth continue to weigh.
Forexpros
