By Kirk Maltais
--Wheat for September delivery rose 3.7% to $7.53 1/2 a bushel on the Chicago Board of Trade Thursday in response to the USDA trimming its outlook for wheat production across the world.
--Corn for December delivery rose 2.5% to $5.73 1/4 a bushel.
--Soybeans for November delivery rose 0.1% to $13.41 a bushel.
HIGHLIGHTS
Slimmed Down: Weather problems for wheat crops aren't limited to the U.S. and the USDA took an aggressive stance on how much less wheat will be coming from other major growing areas. Both factors propelled grains higher. In today's WASDE report, the USDA cut its outlook for production in Russia, the world's top exporter , to 72.5 million metric tons in 2021, a 12.5 million ton decrease from last month. The USDA also cut Canadian production by 7.5 million tons to 24 million tons. "They cut the Russian and Canadian crop to the bone," said John Payne of Daniels Trading.
Supply Squeeze: Lower-than-expected crop yields reported by the USDA lifted futures across the board. The USDA's forecasts of corn yield at 174.6 bushels per acre and soybean yield at 50 bushels per acre, were both below the analysts estimates provided to The Wall Street Journal. Many grain traders saw the report as being bullish for prices. "Higher futures prices [are] justified," said Terry Reilly of Futures International.
Winning Streak Continues: Soybean futures got support from the USDA's export sales data. The government announced new flash sales for the sixth consecutive session. About 132,000 metric tons of soybeans sold to China for the 2021/22 marketing year and 198,000 tons of soybeans sold to unknown destinations for 2021/22. The confirmation came after the USDA released its new export sales report this morning, showing that corn and soybean export sales were more than forecast by grain traders this week, with China being a prime buyer for the week ended August 5.
INSIGHTS
Lowered Expectations: While grain traders reacted primarily to the USDA's stronger-than-anticipated cut to corn production in 2021, the USDA also reduced its outlook for corn usage and exports. Higher prices are seen as a key factor in reducing expected corn demand, particularly in animal feed, the USDA said in the report. The agency also marked down its expectations for corn exports by 100 million bushels, although noting that ending stocks were down due to lower 2021 production.
Digesting the News: Grains traders often take a day to digest the content of the WASDE, and trade off of their conclusions the next day. However, after today's quick reaction, just how much upside is left is a question mark among traders. "With the aggressive moves from the USDA, it makes it harder for future reports to be overly bullish," said Doug Bergman of RCM Alternatives. Even so, Mr. Bergman notes, the tight supply picture the USDA forecasts means that a big collapse in prices is probably unlikely as well.
Losing Steam: Storm activity seen in U.S. Midwest growing areas is expected to lessen in severity as the weekend approaches, said Arlan Suderman of StoneX. "Strong storm clusters have been the story thus far this week in the central and eastern Midwest, causing damage to crops where they occur," said Mr. Suderman. "More of these storms are possible over the next couple of days, although they are not expected to be as strong, followed by a quieter weekend." Mr. Suderman adds that Tropical Storm Fred is expected to impact the southeast next week, possibly creating dry conditions in the Midwest.
AHEAD:
--The CFTC will release its weekly commitment of traders report at 3:30 p.m. ET Friday.
--The Pro Farmer Crop Tour begins surveying Midwestern farmland Monday.
--The USDA will release its weekly export inspections report at 11 a.m. ET Monday.
--The USDA will release its weekly crop progress report at 4 p.m. ET Monday.
Write to Kirk Maltais at kirk.maltais@wsj.com
(END) Dow Jones Newswires
08-12-21 1549ET
