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Forecast; Agriculture Commodities Prices to Fall

A prior forecast price for Corn at 9 a bu was lowered by 0.75 following last week’s US Department of Agriculture’s most recent World Agricultural Supply and Demand Estimates.

The USDA now estimates the 2012-2013 season-average farm price for Corn at 6.95 to 8.25 bu.

Goldman Sachs NYSE:GS also lowered its estimate on Friday, to 8.25 a bu over the next 6 months at the Chicago trading point.

Wheat prices, once forecast at 10 bu, will average 7.75 to 8.25 a bushel according to the USDA, while Goldman has a price of 9.50 for Chicago-traded Corn.

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Soybean prices are now estimated at 13.90 to 15.90 bu by the USDA and 16.50 by Goldman Sachs. Given that March soybean futures were just over $14 a bushel on Friday, the Goldman estimate may be somewhat optimistic.

The lower prices primarily are the result of higher production estimates for Corn and Soybeans, while Wheat stocks are expected to rise as US exports decline. The USDA raised its Corn production forecast for the 2012-2013 crop year by 19-M bu and Soybean production is expected to rise by 3.2-M tons. Wheat exports are expected to fall by 50-M bu.

While these new estimates could lower prices for everything from ethanol-blend gasoline to Corn flakes, a Goldman analyst is cited as saying:

Our fundamental outlook and projection for very low levels of inventories across all three major crops points to higher price volatility in coming months. The potential wide distribution of future crop prices is currently mis-priced by the options market.

Corn prices are down about 3% today at about 7.16 a bu, while Wheat is down 2.9% at around 8.60 a bu and Soybeans are price around 14.10 bu.

US Agriculture after the Closing Bell Report

Wheat futures sharply extended losses through the day and finished just off session lows. Chicago and Minneapolis wheat futures posted losses in the mid to upper 20s in most contracts. Nearby Kansas City Wheat ended roughly 31 cents lower. Much of Monday’s pressure was tied to spillover from Soybean futures, as traders had little fresh news to digest due to USDA being closed for Veterans Day in the USA.

Corn futures settled 17.25 to 20.75 cents lower through the Jul 2014 contract, which was near session lows. The bulk of the price pressure on corn came from the Soy complex, which was under heavy pressure today. That triggered active fund-led selling, with funds selling an estimated 18,000 contracts, 90-M bu today. Technical-based selling pressure also came into play as support levels were violated.

Soybean futures posted a sharp Southside day of trade and ended low range with losses in the 40s through the May contract. Deferred months were down 30 + cents. Needed rains in dry areas of northern Brazil over the weekend with more in the forecast and a drier forecast for soggy southern regions of the country encouraged follow through selling today as it ups the odds for a record-large soybean crop for the region.

Lean Hog futures faced pressure throughout the day, but Dec through June futures ended mostly high-range and steady to 42.50 cents lower. Far-deferred months saw greater losses. Ongoing USD strength and broad risk aversion encouraged light profit-taking in the hog market after strong gains last week. Plus, demand is likely to be limited this week as some plants are closed in honor of Veterans Day today and Pork demand typically slumps ahead of the Thanksgiving holiday.

Live Cattle futures settled steady to 95 cents lower following a quiet day of trade. Heavy price pressure on grain futures spilled over to live Cattle futures today. That triggered light liquidation pressure, but there was also talk that falling feed prices could spur some herd rebuilding, which is why far-deferred live Cattle futures led losses. Additional pressure on live Cattle came on ongoing concerns with Beef demand as the East Coast recovers from storm damage.