Forexpros – U.S. grain futures ended the week sharply lower on Friday, extending steep losses from the previous session after the U.S. Department of Agriculture unexpectedly raised estimates on corn, wheat and soy stockpiles, easing fears over supply shortages.
Wall Street investment bank Morgan Stanley said in a report Friday that, “Markets once again proved their inability to predict the USDA’s moves, with consensus directionally wrong on many estimates.”
On the Chicago Mercantile Exchange, corn futures for March delivery traded at USD5.9938 a bushel by close of trade on Friday, losing 6.76% over the week. Earlier in the day, prices fell to USD5.9800 a bushel, the lowest since December 20.
Corn prices plunged nearly 8% in the two sessions ended Friday after the USDA unexpectedly raised its global supply estimate of the grain for the 2011-12 marketing season that runs from September to August.
In its monthly World Agricultural Supply and Demand Estimates report published Thursday, the USDA said that it now expected global corn inventories to rise to 128.14 million metric tons, compared to a previous estimate of 127.19 million metric tons.
The upbeat forecast sparked a sell-off in corn futures as analysts had expected the USDA to cut this year’s projection to 123.23 million tons.
The upward revision reflected larger harvests in the U.S., Russia, Ukraine and the European Union, which more than offset losses in Argentina.
U.S. corn inventories were forecast to total 846 million bushels before this year’s harvest, 12% above expectations. Argentina’s corn production was projected at 26 metric million tons, 10% less than last month’s forecast.
Global corn production was estimated to hit an all-time high of 868.06 million, up from a previous forecast of 867.5 million tons.
Meanwhile, soybeans for March delivery retreated 3.15% on the week to settle at USD11.5762 a bushel by close of trade Friday.
On Thursday, prices fell to a three-week low after the USDA lifted its outlook on U.S. soybean stockpiles to 275 million bushels, 20% more than last month’s forecast, as domestic demand and U.S. exports slowed.
U.S. soybean consumption in the three months through November fell to 905 million bushels, approximately 25% lower than a year earlier.
Argentina’s soybean output was expected to total 50.5 million tons, 2.9% below the USDA’s December projection, however the downgrade was not considered significant enough to boost demand for U.S. supplies.
Global soy stockpiles were expected to total 53.43 million metric tons, down a less-than-expected 1.7% from a December estimate.
Elsewhere on the Chicago Board of Trade, wheat for March delivery fell 3.95% over the week to settle at USD6.0100 a bushel on Friday, hovering just above the previous day’s three-week low.
Wheat prices plunged nearly 6% on Thursday after the USDA said that global wheat supplies were forecast to rise to 210.02 million tons, the most since the 2000-01 season, as countries from Australia to Russia raised output.
In the U.S., farmers planted 41.94 million acres of winter-wheat from September to November, more than analysts expected and 3.2% higher than last year.
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.
Agricultural commodities came under further pressure Friday as the U.S. dollar rallied to a 16-month high against the euro, while the dollar index settled at 81.72, the highest since September 2010.
A stronger dollar reduces the appeal of U.S. crops to overseas buyers and makes commodities less attractive as an alternative investment.
The greenback’s gains came as appetite for riskier assets was weighed after ratings agency Standard and Poor’s downgraded the sovereign credit ratings of nine euro zone countries, including France
In the week ahead, grain traders will continue to monitor South America’s corn and soybean crop and how La Nina weather patterns will affect yields. U.S. winter-wheat crop conditions will also be in focus.
Floor trading on the Chicago Board of Trade will remain closed Monday, January 16 for the Martin Luther King Jr. holiday.
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