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Wheat futures rose to the highest price since May on Thursday, and corn futures rallied by nearly 5%, after the U.S. Department of Agriculture lowered its 2021/2022 U.S. supply and yield forecasts for both of the commodities.
The USDA “surprised the markets with larger than expected yield losses projected for both corn and wheat, which is being reflected in today’s price activity,” Sal Gilbertie, president and chief investment officer at Teucrium Trading, told MarketWatch.
“Anticipated excess U.S. corn and wheat supplies continue trending lower over time, which is making the markets nervous and providing price support” in Thursday dealings, he said. Today’s report “confirms that corn, wheat and soybean balance sheets will remain tight at least through this year’s growing season, which is a big change from the abundant grain market surpluses seen for much of the last decade.”
The USDA forecasts U.S. all wheat production at 1.697 billion bushels, down 49 million bushels from the previous forecast. It also reduced its global wheat supply forecast to 1.0657 billion tons, down 16.8 million tons from its previous forecast, citing lower production for Russia, Canada and the United States. The government agency also said it expects U.S. all wheat yield at 44.5 bushels per acre — that’s down 1.3 bushels from the July forecast.
The most-active September wheat contract
WU21,
W00,
was up 20 cents, or 2.8%, at $7.47 ½ a bushel in Thursday dealings after touching a high at $7.62. Prices haven’t traded at levels this high since the first half of May, according to FactSet data.
Wheat prices have strengthened “due to the big drought in the Dakotas and Central Canada,” said Gilbertie, pointing out that South Dakota reportedly hit 100% drought conditions this week on the drought monitor.
The USDA also cut its 2021/2022 forecast for U.S. corn production to 14.8 billion bushels, down 415 million from the July forecast.
“The season’s first survey-based corn yield forecast, at 174.6 bushels per acre, is 4.9 bushels below last month’s trend-based projection,” the USDA’s World Agricultural Supply and Demand Estimates report said. It expects record-high corn yields in Illinois, Indiana and Ohio, but said yields in Minnesota and South Dakota are forecast below a year ago.
The most-active December corn contract
CZ21,
C00,
traded at $5.84 ¼ a bushel, up 25 cents, or 4.5%. For the week, corn prices trade around 4.8% higher, on track for a monthly rise of nearly 7%.
Soybean futures also edged higher Thursday, with the November contract
SX21,
S00,
up 18 ½ cents, or 1.4% at $13.58 ½ a bushel. The USDA forecast 2021/2022 U.S. soybean production at 4.34 billion bushels, down 66 million bushels from the previous forecast, citing lower soybean yields.
