Grain futures edge higher on dry weather, gains limited on supply outlook

Grain futures edged higher on Wednesday as corn and soybeans yields were threatened by dry weather but gains are expected to remain limited on high output outlook.

On the Chicago Board of Trade, corn futures for delivery in September traded at $4.8675 a bushel at 11:39 GMT, up 0.69% on the day. Prices held in range between days high and low of $4.8675 and $4.8213 per bushel respectively. The grain fell 1.95% on Tuesday, trimming current weeks advance to 2.7% after surging 1.96% the preceding five-day period.

Corn and soybeans rose on Wednesday as weather forecasters predicted lack of substantial rains in key growing areas. DTN said yesterday that Southern Minnesota and central Iowa may see 1.3 cm. of rain at most tonight and the rest of the Midwest will remain mostly dry through the end of the week. The USDA said on August 19 that corn and soybean plants are maturing slower than usual, leaving them at risk for frost in the next few months.

Paris-based farm adviser Agritel said today in an online report: “Weather conditions still bring reason to worry about production potential. Changing in weather conditions will decide the trend of the coming weeks.”

Corn fell on Tuesday and was pressured through the early European trading session as yields in Indiana were expected to rise by 48% to an average of 167.4 bushels per acre, according to participants in the Professional Farmers of America Midwest Crop Tour. Meanwhile, yields in Nebraska may surge to 154.9 bushels per acre. Tour participants include brokers, farmers, hedge fund analysts, agronomists and grain buyers who visit seven corn and soybean growing areas over four days.

On August 12, the USDA trimmed its U.S. corn output forecast to 13.763 billion bushels, 1.3% below its July estimate at 13.950 billion and also less than the 14.036 billion forecast by a Bloomberg survey. Yields are also expected to be lower with the government agency cutting its expectations for 154.4 bushels per acre, which is below last month’s estimate at 156.5 bushels and analysts’ expectations for a 157.7 bushels-per-acre yield. Stockpiles are also poised to drop and will equal 1.837 billion bushels, 6% below July’s 1.959 billion projections.

However, according to Goldman Sachs Group Inc. and Deutsche Bank AG, corn output will be above USDA’s latest forecast and will total 14.14 billion and 14.25 billion bushels respectively, the two groups predicted. Even if the government agency’s projection is met, this year’s harvest will still be a record-high and 28% above 2012′s drought-damaged crop.

Soybeans rebound

Soybeans rebounded after settling lower on Tuesday. The September contract traded at $13.2238 per bushel at 11:40 GMT, up 1.07% on the day. Prices held in range between days high and low of $13.2613 and $13.0438 per bushel respectively. The oilseed slipped 0.97% on Tuesday as ample supply outlook offset last weeks reported deterioration of the crops quality, trimming its current weeks decline to little over 3%.

The inspected by the tour soybeans fields in Nebraska showed an average of 1 138.9 pods per each 3-by-3 feet plot, well above last years 894 pods. In Indiana, inspections showed an increase to 1 185 pods on average, compared to 1 033 a year earlier. However, the reported figures were lower than the three-year average of 1 162 pods per three square feet, which supported prices.

The USDA reported on Monday that crop condition has worsened last week. As of August 18, 10% of plants were rated very poor-poor, compared to 9% in the previous week and 37% a year earlier. Meanwhile, 36% were categorized as “Fair”, above the preceding five-day period’s 34% and below 2012′s 53%. As for the premium quality, 62% of the crop was rated good-excellent, marking a 2% decline from a week earlier but still well above last year’s 31%.

The U.S. Department of Agriculture trimmed its soybean production forecast to 3.255 billion bushels last Monday, 5% below July’s 3.42 billion estimate, but still 8% higher than a year earlier. Yields expectations were also reduced and now stood at 42.6 bushels per acre, below the previous reading of 44.5 bushels and analysts’ projections for a 43.6 output per acre.

Elsewhere on the market, wheat also gained, offsetting yesterdays losses. September futures traded at $6.4000 per bushel at 11:38 GMT, up 0.91% on the day. Prices held in range between days high and low of $6.4050 and $6.3438 per bushel respectively. The grain slipped 0.94% on Tuesday reversed its momentum on Wednesday and kept its weekly advance at 1.27%.

The USDA reported on Monday that the winter wheat harvest is nearing completion and has surpassed the five-year average pace. AS of August 18, 96% of the crop was harvested, marking a 4% advance from the previous week. This was above the five-year average pace of 94% and 1% below last year’s 97%.

As for the spring wheat crop, harvesting fell well behind 2012′s pace. As of last week, 18% of the production was harvested, below both the five-year average and last year’s readings of 38% and 77% respectively. Crop condition remained overall the same compared to a week earlier with 66% of spring wheat categorized as “Good” and “Excellent”. Information about last year’s quality was not provided.