The U.S. Agriculture Department bumped up its estimate for 2009 U.S. corn production to a new record on Tuesday, shocking traders who anticipated a decline after a difficult harvest.
The news sent Chicago futures prices plunging, with March corn CH0 locked down the daily 30-cent limit, or 7 percent, to $3.92-1/2 and January soybeans SF0 down 3.6 percent to $9.66 per bushel.
The corn crop was pegged at 13.151 billion bushels, up 230 million bushels from the government's last forecast and 330 million bushels higher than the average of analysts' estimates,12.821 billion bushels. The USDA projection even topped the highest trade estimate of 12.996 billion bushels.
"There's not a lot here for the bull to hang his hat on. It's going to be ugly," said Jack Scoville, vice president and senior analyst at The Price Futures Group.
The 2009 soybean harvest was forecast at a record 3.361billion bushels, which also topped analyst estimates of 3.338 billion bushels and was up from the last USDA projection of 3.319 billion bushels.
China has been gobbling up U.S. stocks of soybeans at a near-record pace, but new global supplies will soon provide competition.
The USDA raised its forecast for soy production for Brazil, the No. 2 producer, to a record 65 million tonnes. Argentina, the third-largest producer, should see production recover to 53 million tonnes, up 66 percent from last year, the USDA said.
Growing stockpiles of the crops in the United States and other parts of the world bode for lower prices, analysts said. "There is considerable downside risk for prices through 2010," said Brian Basting, analyst for Advance Trading.
It may not be the last word on the 2009 crop. The USDA said it may still make further revisions to the estimate in its March 10 report because unusually wet weather left significant acreage unharvested. "I'm not sure you've got the biggest bean yield yet. I think once this crop is all put away and everybody looks back that you're probably even bigger than the USDA says," said Roy Huckabay, analyst with The Linn Group.
Smallest Wheat Plantings Since 1913
The harvest delays for corn and soybeans combined with poor prices led to the smallest winter wheat plantings in 97 years, the USDA said, releasing its first estimate of seeded acreage, which was far smaller than traders had expected.
Winter wheat plantings for 2010 were estimated at 37.097 million acres (15.013 million hectares), below analysts' average estimate of 40.501 million acres, and down 14 percent from 2009. The USDA projection was below the lowest trade estimate of 38.387 million acres.
Farmers could be heading for the smallest winter wheat crop since 1991's 1.372 billion bushels. The plantings estimate implies winter wheat production in the range of 1.3 billion to 1.4 billion bushels using five-year average yields and abandonment rates, according to Reuters calculations.
"The price of wheat was really down," said Ricky Cornutt, an Alabama farmer, who reduced his wheat plantings to 100 acres from 300 acres when he planted in October. "We just decided with the price wasn't worth it," he said.
The smaller plantings may eventually support new-crop wheat futures, but the glut of wheat and corn on the world market will pressure prices in the near term, analysts said.
March wheat futures WH0 were down 7.8 percent at $5.27-3/4 per bushel on Tuesday. The USDA has projected U.S. exports from the 2009 crop will be the smallest in 38 years, hampered by competition from Russia and Canada.
Wheat stocks were projected at 976 million bushels — the highest in more than 20 years — above estimates of 914 million and up from previous USDA estimates of 900 million.
The USDA will release its first projection of 2010 corn and soy plantings in February. The lowest acreage means there will be more room to plant corn and soybeans in 2010, said Rich Feltes, director of research for MF Global, in a note to clients.