Grain futures edge lower on supply outlook

Grain futures fell on Tuesday as investors weighed the outlook for hot and dry weather in the Midwest that could hurt crop yields against expectations for record-high production. Corn retreated more almost 1%, while wheat posted a moderate loss and soybeans remained fairly unchanged.

On the Chicago Board of Trade, corn futures for delivery in December traded at $4.9613 per bushel at 9:38 GMT, down 0.97% on the day. Prices ranged between days high and low of $5.0388 and $4.9563 per bushel respectively. The contract surged 1.4% on Monday to a 1-month high but trimmed its weekly advance to 0.4% following Tuesdays retreat.

Meanwhile, soybeans for November delivery fell to $13.8863 per bushel at 9:37 GMT, down 0.06% on the day. Futures held in range between days high and low of $13.9488 and $13.8275 per bushel respectively. The oilseed gained 2% on Monday and touched a 1-month high, cutting its weekly advance to 1.9% following Tuesdays minor loss.

The corn and soybean crops were well supported recently as weather forecasters continued to predict unfavorable conditions. MDA Information Systems LLC said yesterday that the central and western Midwest will continue to experience warm and dry weather in the next six to ten days which would stress production.

On August 12, the USDA reduced its U.S. corn output forecast to 13.763 billion bushels, 1.3% below its July estimate at 13.950 billion. Stockpiles are also poised to drop and will equal 1.837 billion bushels, 6% below July’s 1.959 billion projections. Soybeans production forecast was revised downward to 3.255 billion bushels, 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.

According to the Professional Farmers of America, which made a four-day tour last week of fields in seven Midwest states, soybean output may fall by 3% below USDA’s 3.255 billion bushels projections. Meanwhile, corn production might contract by 2.2% below the government agency’s 13.763 billion bushels forecast but it is still expected to be record high.

Graydon Chong, a grains and oilseed analyst at Rabobank International in Sydney, said for Bloomberg: “With the amount of corn that’s been planted this year, even if we do have a little bit of a hiccup in terms of production, we should still have a pretty good carryout. We may well see some traders take profit here and reassess, as is normal when you have big market movements.”

The USDA said in its weekly crop progress report on Monday that corn condition has deteriorated last week, despite remaining a lot better than last year. As of the week ending August 25, 59% of the crop was rated good-excellent, compared to 61% a week earlier and 22% in the comparable period in 2012.

As for the soybeans crop, the government agency again marked a worsening in the condition. As of last week, 58% of the crop was categorized as “Good” and “Excellent”, below the preceding weeks 62% but still well above last years 30%. The USDA also reported that the blooming stage was nearing an end with 96% of the plants having bloomed as of August 25, compared to the five-year average of 98% and 2012s 99% during the comparable week.

Bill Northey, Iowa’s secretary of agriculture, said for Bloomberg: “Crop conditions continue to decline, and that trend is likely to continue with the extremely warm weather that is being forecast for the week ahead. Hot temperatures and dry soils can hurt yields on both corn at soybeans at this point of the season.”

Elsewhere on the market, wheat fell by 0.46% to $6.6413 per bushel at 9:37 GMT. The December contract ranged between days high and low of $6.7025 and $6.6263 a bushel respectively. The grain surged more than 5.2% on Monday, the biggest daily gain since April 29, hitting a 1 1/2-month high and extending its weekly advance to 4.8%.

The USDA reported on Monday that the spring wheat condition remained fairly the same from a week earlier with 67% of the crop rated as good-excellent as of August 25 and 26% categorized as “Fair”, compared to 66% and 27% respectively a week earlier.

The government agency also said that harvesting fell behind last years pace. As of last week, 42% of the spring wheat crop was harvested, which marked a 26% advance from the previous period. This however well behind the five-year average of 54% and 2012s 87% spring wheat harvested during the comparable week.