Soybeans Drop as USDA Surprises Analysts With Record Yield View

Updated on
  • Yield forecast from USDA exceeded all estimates in survey
  • Production will reach all-time high this season, agency says

The U.S. soybean crop, already widely expected to break previous records, will be even bigger than thought, according the latest government forecast.

Yields this season will reach a record 50.6 bushels per acre, the U.S. Department of Agriculture said Monday. That exceeded all the estimates in a Bloomberg survey and will push production to an all-time high. Soybean futures in Chicago fell the most in two weeks after the agency released its report in Washington.

The “USDA got a lot more aggressive on yield than what the trade was expecting,” Ted Seifried, chief market strategist at Zaner Group LLC in Chicago, said in a telephone interview. Prices “should be under pressure on the idea that we’ve got to move a lot of beans in the next few months,” he said.

For a recap of TOP Live blog coverage of the USDA report, click here.

Soybean futures for November delivery dropped 1.6 percent to close at $9.6425 a bushel at 1:20 p.m. on the Chicago Board of Trade, capping the biggest drop for the contract since Aug. 25. Prices fell for the first time in seven sessions.

Big Supplies

After three straight years of price declines, the outlook for bigger supplies underscores why banks including Goldman Sachs Group Inc. are still bearish on agriculture. The bumper crops are also helping to keep global inflation in check, with world grain costs staying near the lowest since 2009. The slump is hurting demand for seed producers and farm-equipment makers.

The big crop could leave farmers and grain elevators squeezed on space to store excess supplies. U.S. soybean inventories before the 2017 harvest will rise 87 percent to 9.95 million tons, the highest in a decade, the USDA estimates. Stockpiles are climbing as the USDA lowered its outlook for imports by China, the No. 1 consumer, to 86 million tons, down from 87 million forecast a month earlier.

Higher U.S. soybean supplies are compounding a global glut of oilseeds. The agency forecast bigger world production this month, as increased peanut, cottonseed and sunflowerseed output offset a reduced outlook for rapeseed.

Corn Crop

The agency is also expecting a record U.S. corn crop. Domestic production forecast at 15.093 billion bushels exceeded the 14.951 billion average estimate from analysts surveyed by Bloomberg. Reserves before the 2017 harvest will rise to the highest since 1988, boosting global inventories to an all-time high.

Corn futures for December delivery dropped 0.4 percent to $3.395 a bushel on the CBOT, snapping three straight sessions of gains.

Wheat was the only one of the big three U.S. crop futures to hold gains after the USDA report. The agency lowered its expectation for world inventories, citing a smaller European crop and increased global food and feed demand amid low prices. The stockpiles are still forecast to rise to a record. Futures for December delivery on the CBOT closed 1.4 percent higher at $4.0925 a bushel.