Forexpros – U.S. grain futures ended Friday’s session mixed, with corn prices retreating from an all-time high hit earlier in the session amid concerns high prices may be hurting global demand for U.S. supplies.
Meanwhile, soybean futures rallied to a two-week high after the U.S. Department of Agriculture lowered its estimate for the U.S. soy harvest, while wheat prices slumped nearly 3% after the USDA forecast an increase in wheat production.
In its Supply & Demand Estimate Report published Friday, the USDA lowered its forecast for near-term U.S. corn and soybean supplies, but predicted lower exports, as a recent rally in grain prices dented demand for U.S. grains.
Corn prices have surged nearly 60% since mid-June, wheat futures soared approximately 49%, 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.
On the Chicago Mercantile Exchange, corn futures for September delivery settled at USD8.0075 a bushel by close of trade on Friday. Earlier in the day, front-month prices hit a record high of USD8.4238 a bushel before turning lower.
On the week, the September corn contract dipped a modest 0.35%.
Corn prices lost 2.2% Friday 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, below market expectations for 11.026 billion and 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 on the Chicago Board of Trade, soybeans for September delivery settled at USD16.7362 a bushel by close of trade Friday. Earlier in the day, the front-month contract hit USD16.9887 a bushel, the highest since July 25.
On the week, September soy prices rallied 4.1%.
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.
In a separate report, the USDA confirmed on Friday that China bought 290,000 tonnes of U.S. soybeans for shipment in the marketing year beginning September. China is the world’s largest soybean consumer.
Meanwhile, wheat for September delivery settled at USD8.8700 a bushel by close of trade on Friday. Earlier in the day, prices hit a three-week high of USD9.3088 a bushel before turning sharply lower.
On the week, the September wheat contract declined 0.25%.
Wheat futures tumbled nearly 3% after the USDA raised its average 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.
In the week ahead, grains traders will focus on the USDA’s weekly crop progress report on Monday, as well as Thursday’s weekly exports data.
Corn and soybean traders will continue to pay close attention to weather conditions in the U.S. Midwest and Great Plains-region.
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