The United States painted a rosier picture than expected for global grain stocks and the U.S. winter wheat crop on Thursday, sending prices in a freefall toward recent-year lows.
The U.S. Agriculture Department projected that, after a larger-than-expected harvest last year, corn and soybean stocks will be much higher at the end of this marketing year than traders had predicted.
Farmers were also taking advantage of good soil conditions to sow a bigger-than-expected winter wheat crop while world wheat stocks were pegged the largest in 12 years and the second largest in the past 50 years.
After big declines in European trading, corn, soybean and wheat futures fell sharply after markets opened in Chicago. CBOT corn fell its daily limit, dropping 40 cents to $6.11-1/2 a bushel.
The report, however, will be welcomed by inflation-minded governments around the globe that fear a worsening drought in South America could strain grain stocks, which remain relatively thin.
The U.S. corn stocks projection was still the smallest in 16 years, leaving little margin if the United States is struck by foul weather or drought in the year ahead.
Grain prices had been on the rise since reaching a more-than-one-year low in December on concern that Argentina's corn crop was shrinking under a withering drought. But Thursday's report took the wind out of the market's sails.
"It was pretty much negative across the board," said Mark Schultz, an analyst at Northstar Commodities. "The biggest shocker is that the corn crop ended up getting larger, not smaller."
USDA projected corn ending stocks at 846 million bushels, 2 million bushels lower than its estimate last month but a whopping 13 percent higher than traders expected, on average, in a Reuters survey.
Soybean ending stocks rose for a third consecutive year to the highest level in five years. At 275 million bushels, the supply was 18 percent higher than traders had forecast.
USDA's January crop data has a tradition of roiling markets with surprises, and it will stir more controversy with grain traders who have been caught wrong-footed by several recent government reports.
Analysts were unusually divided on the corn stocks data ahead of Thursday's release.
The USDA increased its corn production estimate marginally, where analysts had expected a small dip. At the same time, the agency stood pat on its estimates of corn consumption by livestock operations and the ethanol industry.
The USDA projected corn exports jumping by some 50 million bushels, aided by the drought that is shriveling the crop in Argentina.
But the agency was conservative on how badly the dry conditions have reduced potential South American production.
The USDA cut its estimate of corn production in Argentina by 10 percent, which was not as much as some traders had expected. It held steady on Brazil corn production, which analysts expect will drop.
For soybeans, a small bump-up in USDA production estimates was coupled with a 2 percent cut in exports and a drop in domestic use.
In the first estimate of wheat acreage for the year ahead, the report showed farmers took advantage of good fall moisture conditions to plant 41.947 million acres, up 3.2 percent from a year earlier and 2.5 percent beyond trade expectations ahead of the report. The winter wheat seedings were up for a second consecutive year and represented the largest acreage since 2009.
On Dec. 1, bins held 2.7 percent more corn and 1.8 percent more soybeans than traders had expected, another indicator of larger-than-expected supplies and disappointing demand for the crops.
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