Grain futures edge lower, wheat hits one-week low on global glut forecasts

Grain futures edged lower on Thursday, with wheat hitting one week lows amid increased output estimates from Canada and Australia while wheat production is already at an all-time high. Prices were further pressured after the Agricultural Market Information System, set up by the Group of 20 countries, announced today that global wheat, corn and soybeans harvests in 2013-14 will be higher than estimated a month ago.

Wheat futures for settlement in March traded at $6.5613 per bushel by 13:49 GMT, losing 0.74% on daily basis. Prices jumped to a session high of $6.6288, while day’s low was touched at $6.5538 per bushel. The grain has lost 1.8% this week, after it gained nearly 3% last week and added 0.8% in the previous five-day period.

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 Septembers outlook of 33 million tons and 38% higher than a year ago.

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

Paul Deane, an analyst at Australia & New Zealand Banking Group Ltd. in Melbourne, said, cited by Bloomberg: “There’s been a couple of upgrades in Australia and Canada, so that’s weighing on the wheat market overall.”

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.

DTNs December 4 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. Cold temperatures will cause a change to snow and ice through the Ohio River valley and the middle and lower Mississippi River valley at the end of this week. In the Southern Plains, a return to much colder weather is in store this week but probably not cold enough to harm wheat. Winter wheat is likely well-established through the region. The area from northeast Colorado and northwest Kansas to southwest Nebraska may be somewhat at risk, depending on snow cover and the intensity of the cold in this sector.

Corn for March delivery fell 0.87 percent to $4.3263 a bushel by 13:10, snapping two days of gains. Futures held in range between day’s high and low of $4.3588 and $4.3188 per bushel, respectively. Corn added 0.38% last week, after a gain of 0.4% in the previous 5-day-period.

Soybeans down as well

Elsewhere on the grains market, soybeans futures for settlement in January traded at $13.2575 per bushel by 13:26 GMT, losing 0.21% on daily basis. Prices jumped to a session high of $13., while day’s low was touched at $6.6138 per bushel. The grain gained nearly 3% last week after it added 0.8% in the previous five-day period.

Yesterday it was reported that Brazilian soybeans farmers are 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, 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 episodes of scattered showers will favor developing corn and soybeans during the five-to-seven-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.