Bloomberg — Soybeans rose on a shrinking outlook for Brazil’s harvest, while wheat fell as U.S. grain reserves are forecast to expand amid stalling demand.
Output in No. 1 soybean grower Brazil is now seen at 139 million tons, down a previous estimate of from 144 million, according to the U.S. Department of Agriculture’s report, known as WASDE. Analysts expected 141.6 million tons, according to a Bloomberg survey.
The year’s first U.S. supply-and-demand estimates for crops coincide with inflation worries and uncertainty over everything from fertilizer costs to droughts. While the USDA’s outlook for bigger world wheat supplies and an upward revision to the U.S. soybean harvest might take the edge off food-price concerns, the steeper-than-forecast cut to Brazilian soybean projections caught the market off guard.
“USDA has traditionally been pretty conservative on revisions to South America in January,” said Ken Morrison, a St. Louis-based independent commodity trader.
Most-active soybeans in Chicago settled the trading day up almost 1% and less than a cent shy of $14 a bushel.
Dryness in South America is threatening soybean crops in Brazil and putting expectations for a record large harvest in doubt. A shortfall could boost world demand for U.S. beans. It could also lead to price increases that would contribute to worsening food inflation. Traders currently are awaiting rains that could arrive next week in dry areas in South America, with that forecast helping to take soybeans off recent highs.
Revisions put the recently completed U.S. soybean harvest back on track as the biggest on record.
Chicago wheat tumbled as much as 2.2% to $7.535 a bushel.
Wheat stockpiles remain at a five-year low, but could start to rebound in coming months, with some analysts expecting the USDA to eventually boost its outlook for Australian grains.
“Wheat is suffering because it knows the Aussie numbers have to come up,” said Charlie Sernatinger, global head of grain futures at ED&F Man Capital Markets Inc. in Chicago.
Corn futures fell with the U.S. forecasting bigger-than-expected domestic production and stockpiles.