Grain futures extend gains after USDA cut crop forecasts

Grain futures extended Mondays gains on Tuesday after the U.S. Department of Agriculture cut its corn and soybeans output and yield-per-acre forecasts, while wheat estimate remained unchanged.

On the Chicago Board of Trade, corn futures for delivery in September traded at $4.7350 a bushel at 12:12 GMT, up 0.32% on the day. Prices ranged between days high at $4.7650 and low of $4.6838 a bushel. The grain surged 1.67% on Monday, the biggest daily gain since July, extending current weeks advance over 1.8% after declining 15% in the last three weeks.

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 months 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 Julys 1.959 billion projections.

In its weekly crop progress report, the USDA said that corn silking remained near the five-year average pace. As of August 11, 94% of of the crop was in the silking stage, 1% below the five-year average and behind last years full completion during the comparable week.

As for the crop condition, it was the same like a week earlier and a lot better than last years drought damaged crop. As of August 11, 11% of the plants were rated very poor-poor, compared to 51% in 2012. Meanwhile, 25% of the crop was categorized as “Fair”, below last years 26%. As for the premium quality, 64% was rated good-excellent, well above the previous years 23%.

Soybeans gain as well

Meanwhile, soybeans also advanced and traded at $12.6550 per bushel at 12:13 GMT, up 0.66% on the day. Prices ranged between days high at $12.6888, the strongest level since July 30, and days low of $12.5250 a bushel. The oilseed jumped 3.02% on Monday, its biggest daily gain since June 2012, extending current weeks advance to 3.8% after surging 0.64% the previous week.

The U.S. Department of Agriculture trimmed its soybean production forecast to 3.255 billion bushels, 5% below Julys 3.42 billion estimate. 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.

Dale Durchholz, the senior market analyst for AgriVisor LLC in Bloomington, Illinois, said for Bloomberg: “Cool weather in July hurt yield potential more than expected, and now the markets are adding a weather-risk premium. The smaller U.S. corn and soybean crops were a surprise and will increase the importance for an extended growing season.”

In its crop progress report, the government agency said soybean blooming fell a bit behind the five-year pace. As of August 11, 88% of the plants were in the blooming stage, marking a 9% advanced from the previous week but 4% below the five-year average and 8% behind last years readings.

As for the plants condition, the USDA said it was almost the same as last week and a lot better than the previous year. Nine percent of the crop was rated very poor-poor, compared to 38% a year earlier. Meanwhile, 27% was categorized as “Fair”, below last years 32%. As for the premium quality, 64% of the crop fell in the “Good” and “Excellent” categories, well above 2012s 30%.

Wheat advances

Wheat also surged on Tuesday, despite the fact the USDA didnt trim its production forecast. The grain traded at $6.3825 a bushel at 12:12 GMT, up 0.51% on the day. Prices ranged between days high and low of $6.4338 and $6.3363 per bushel respectively. The September contract rose by 0.26% on Monday, extending its current weekly advance to over 0.7% after plunging 4.03% the preceding week.

The U.S. Department of Agriculture kept its 2013-2014 U.S. wheat output forecast unchanged at 2.114 billion bushels, a bit above analysts expectations for 2.106 billion bushels. Global production is still expected to reach an all-time record high of 705.4 million tons.

Wheat prices however rose on Monday and continued to advance on Tuesday as the government agency reported in its weekly crop progress report that spring wheat harvesting fell well behind last years pace. As of August 11, only 6% of the spring wheat crop was reaped, compared to the five-year average pace of 24% and last years 61% during the comparable week.

Meanwhile, winter wheat harvesting was 1% above the average speed at 92% and 2% below last years 94%. An advance of 5% from the preceding weeks 87% was made.

As for the spring wheat condition, the USDA reported it was generally the same like the previous seven-day period, and a bit better compared to last year. As of August 11, 8% of the crop was rated very poor-poor, compared to 11% in 2012. Meanwhile, 26% of the plants were categorized as “Fair”, 2% below the same week last year. As for the premium quality, 66% was rated good-excellent, compared to 61% a year earlier.