U.S. grains: Wheat nears three-month low on bigger-than-expected supplies

U.S. wheat futures approached a three-month low on Tuesday after a government crop report projected that global supplies will exceed analysts’ expectations.

Corn and soybean futures slipped on profit-taking following the U.S. Department of Agriculture (USDA) report.

Traders had been awaiting the monthly report for an update on global supplies and demand as the United States is rebuilding corn and soy inventories after a historic drought slashed U.S. harvests last year.

Wheat supplies already were seen as comfortable when USDA raised the outlook for global inventories by 4.3 million tonnes to 182.78 million. Analysts had estimated global inventories at 179.11 million tonnes.

Record wheat production in Canada and higher Canadian exports are expected to add to wheat supplies in the United States, USDA said.

“Canada has got a lot of wheat; Australia has got a lot of wheat. That really does contain the upside,” said Sterling Smith, futures specialist for Citigroup.

Chicago Board of Trade December wheat sank 9-1/2 cents to $6.29-1/2 a bushel, settling near its session low of $6.26-1/2 (all figures US$). That was the lowest price for a front-month contract since Sept. 12.

Kansas City Board of Trade December wheat dropped nine cents to $6.94-1/2, while Minneapolis Grain Exchange December wheat lost 9-1/4 cents to $6.58-3/4 a bushel.

March corn lost 2 cents to $4.36 a bushel. January soybeans slid 5-1/2 cents at $13.38-1/4.

Wheat drags down corn

Profit-taking weighed on corn and soy prices because reduced supply estimates were generally in line with expectations, said Mike North of First Capitol Ag.

Losses in wheat added pressure to corn, said Mike Zuzolo, president of Global Commodity Analytics. Both grains are used for animal feed.

“I think the short-term destiny of the corn really is in the hands of the wheat,” Zuzolo said.

USDA pegged U.S corn inventories at 1.792 billion bushels, below expectations for 1.871 billion. Global corn ending stocks of 162.46 million tonnes were below expectations for 163.3 million.

USDA put U.S. soybean inventories at 150 million bushels, near analysts’ estimates for 153 million, and global supplies at 70.62 million tonnes, below estimates for 71.64 million.

South American outlook

The markets also were focused on Southern Hemisphere production, with favourable conditions in South America pressuring the soybean market, traders said.

USDA raised its estimate for Argentina’s soy crop by one million tonnes, to 54.5 million, and kept its estimate for Brazil’s harvest unchanged at 88 million.

“The trade’s going to say USDA’s being cautious with South America,” said Jim Gerlach, president of A/C Trading.

– Tom Polansek reports on agriculture and ag futures markets for Reuters from Chicago. Additional reporting for Reuters by Colin Packham and Nigel Hunt.