Grain futures edge lower for a second day, wheat output at a record-high

Grain futures lost ground on Friday, with wheat output reaching a record-high.

Wheat futures for settlement in March traded at $6.5138 per bushel by 14:49 GMT, losing 0.1% on daily basis. Prices jumped to a session high of $6.5488, while day’s low was touched at $6.5138 per bushel. The grain has lost 2.5% this week, after it gained nearly 3% last week and added 0.8% in the previous five-day period.
Wheat plunged 16% this year as the US government estimated global output will reach a record-high boosted by increased harvests in Canada and Russia. Meanwhile, a report by USDA showed US export sales of wheat contracted by 595 to 229 176 metric tons in the week ended November 28th from 562 216 tons a week earlier.

Luke Mathews, a commodity strategist at Commonwealth Bank of Australia, said today, cited by Bloomberg: “Contributing to the bearish tone overnight were weaker-than-expected U.S. wheat export sales, perhaps because of higher prices last week, and strong global supply forecasts.”

On Wednesday, the government of Canada revised up its forecast for domestic wheat output. The crop is expected to reach 37.5 million metric tons, up from September’s outlook of 33 million tons and 38% higher than a year ago.

On December 3rd, the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) revised its crop estimates upward to the third-biggest on record.

A Bloomberg survey among 20 analysts and trading firms showed that global wheat inventories before the 2014 Northern Hemisphere harvest may reach 179.98 million tons, larger than the US Department of Agriculture (USDA) forecast of 178.48 million tons in November. The USDA is due to update its estimates on December 10th.

DTN’s December 5th weather forecast called for sharply colder weather in the Midwest during the next few days. The soft red winter wheat crop will be favored by precipitation through the southeast and south areas and in the Delta, which will maintain soil moisture. In the Southern Plains, a major ice storm is likely in the southeastern areas. The area from northeast Colorado and northwest Kansas to southwest Nebraska will experience below normal temperatures, but winter wheat is likely well-established through the region and damage threats through the region appear minimal.

Meanwhile, corn for March delivery fell 0.23 percent to $4.3163 a bushel by 15:47 GMT. Futures held in range between day’s high and low of $4.3662 and $4.3113 per bushel, respectively. Corn added 0.38% last week, after a gain of 0.36% in the previous 5-day-period.

Soybeans edge lower

Elsewhere on the grains market, soybeans futures for settlement in January traded at $13.19385 per bushel by 14:54 GMT, losing 0.49% on daily basis. Prices jumped to a session high of $13.2775, while day’s low was touched at $13.1688 per bushel. The grain gained 1.3% last week after adding more than 3% in the preceding five-day period.

On Wednesday, it was reported that Brazilian soybeans farmers were planning to sow a second crop in the off-season rather than switching to corn, as they usually do. This seems enough to cause a record surplus of soybeans on a global level.

Few farming companies, including Vanguarda Agro SA planned to make the switch for the May-to June harvest for the first time instead of losing even more money in the off-season on corn. Vanguarda Agro SA recorded the biggest third-quarter loss in a year.

Farmers in the biggest producing Brazilian state, Mato Grosso, which accounts for about a tenth of the world’s soybeans harvest, decided to replant 1 million hectares with soybeans out of 3 million previously sowed with corn for the May-to-June harvest.

DTN reported that in Brazil showers and thunderstorms will favor developing corn and soybeans during the next five-day period. Hot conditions will will be brief during this period. There is some risk to the harvest of wheat in Rio Grande do Sul, which in turn will delay the final planting effort for soybeans planted after the wheat harvest.