USDA Raises Grain Price Forecasts Amid Global Supply Shortages

Strategic Insights -

The U.S. Department of Agriculture (USDA) has increased its forecast of season-average cash prices for grains, citing reduced global production due to hot and dry weather in South America. The agency raised its estimates for wheat/oats by 10 cents per bushel and soybeans by 25 cents. The USDA also reduced its projections for corn/soybean production in Brazil and Argentina, attributing the decline to crop losses caused by severe weather conditions.

Key Takeaways:

  • The USDA increased its forecast for season-average cash prices for wheat/oats by 10 cents per bushel and soybeans by 25 cents.
  • The agency reduced its estimates for corn/soybean production in Brazil and Argentina by 9.1 million tons (334 million bushels).
  • The global soybean production was reduced by 224.1 million tons (8.233 billion bushels) due to South American crops affected by hot and dry weather.
  • The USDA left its outlook on domestic wheat and corn carryover unchanged from last month, at 655 million and 1.79 billion bushels, respectively.
  • Domestic basis levels were mixed, suffering average daily declines of 1/4 cent for SRW wheat/sorghum and one cent for HRS wheat.
  • U.S. grain futures were similarly uneven, with cash-contracts down 1-4 cents for corn/spring wheat but up fractionally for winter wheat and 7 1/2 cents higher for soybeans.
  • Doane Agricultural Services called for wheat futures to resume day-trading at levels steady to three cents lower, citing strength in the dollar index overnight.

Statistics:

  • USDA projected U.S. soybean ending stocks for 2008-09 at 210 million bushels.
  • The U.S. season-average soybean price range for 2008/09 was projected at $8.75 to $9.75 per bushel.
  • The reduction in estimates of corn/soybean production across Brazil and Argentina was attributed to 9.1 million tons (334 million bushels) of lost crop.
  • Global soybean production was reduced by 224.1 million tons (8.233 billion bushels).
  • National cash price indexes maintained by the Minneapolis Grain Exchange stood at $9.56 1/4 for soybeans.
  • Domestic cash prices averaged $3.52 3/4 for corn, $5.32 1/4 for hard red winter wheat, $4.31 1/4 for soft red winter wheat, and $6.65 1/4 for hard red spring wheat.

Sources:

  • Dow Jones Commodities News via Comtex (Feb 10, 2009)
  • USDA
  • Advantage Grain
  • Doane Agricultural Services
  • DTN Ag Weather
  • Minneapolis Grain Exchange