U.S. corn and soybean production in 2014, already pegged at record highs, will be higher than expected a month ago and somewhat above trade expectations, the U.S. government said on Thursday, triggering a swift drop in Chicago grain markets.
Soybean futures fell about 1.5 percent to a new contract low on the Department of Agriculture report, corn skidded about 2.5 percent and wheat, already at its lowest since July 2010, extended its losses to about 1.3 percent on a larger-than-expected jump in projected world stocks.
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"We are swamped with grain stocks, not only in the U.S. but in the world," said Don Roose, an analyst with U.S. Commodities.
At 14.395 billion bushels, the corn crop beat out trade estimates averaging 14.288 billion. Ending stocks were forecast to exceed 2 billion bushels for the first time in a decade.
USDA estimated the U.S. soybean crop at a record 3.913 billion bushels, up 19 percent on the year and above trade expectations averaging 3.883 billion. That opens the door a bit wider for a once-unthought-of 4 billion-bushel crop to be harvested this fall.
Soybean ending stocks will more than triple in 2014/15 from the tightest in four decades to 475 million bushels, versus 430 million a month ago and the highest since 2006/07.
"There is nothing friendly on the bean sheets at all," said Joe Vaclavik, analyst with Standard Grain.
At the start of this week, 74 percent of corn and 72 percent of soybeans were rated in good to excellent condition after favorable rains in August.
At this point, on the eve of harvest, the major threat to the crop would be a widespread early freeze to cut short what has been a highly successful growing season.
"We will lose some bushels up north - it's very cold in Wisconsin, North Dakota and Minnesota - but those losses will certainly be offset in Illinois, Iowa, Indiana and Nebraska, where the (corn and soybean) yields are just huge," said Mark Gold of Top Third Ag Marketing.
Overall corn yields were forecast at a record 171.7 bushels per acre, with 18 states expected to post new yield marks. Sept. 1 data indicated the highest number of ears on record for the 10 key corn producing states, USDA said.
Soybeans were also in great shape. As a group the 11 major producing states had a higher pod count than a year ago, and development was slightly ahead of normal.
Thirteen states are on pace for record high soybean yields, USDA said, including No. 1 producer Illinois.
"This big of an increase (in U.S. soybean yields) this soon is confirmation of what they're seeing out there in the field ... that the reported yields are just coming in huge," said Arlan Suderman of Water Street Solutions.
Projected U.S. season-average prices for soybeans were lowered by 35 cents per bushel, and for wheat and corn by 40 cents per bushel to reflect recent market price declines.
New-crop corn supplies will be a record 15.607 billion bushels. USDA raised its projected 2014/15 ethanol usage figure to 5.125 billion bushels, matching 2013/14.
CHINA, ARGENTINA CORN CROPS LOWERED
USDA raised its 2014/15 world wheat ending stocks forecast to over 196 million tonnes, above expectations. Much of the production increase came from the EU and Ukraine, up a combined 5.1 million tonnes.
USDA raised 2014/15 world corn ending stocks even while cutting production in China and Argentina, partly to pass through higher beginning supplies.
The Chinese corn crop was cut by 5 million tonnes, to 217 million, based on dryness in the North China Plain and Northeast. But projected Chinese imports were steady at 3 million tonnes.
For Argentina, in the midst of a financial crisis, USDA cited lower expected plantings in trimming the crop by 3 million tonnes. Some farmers there are expected to have trouble financing their plantings.
Forecasts for soybean production in Brazil and Argentina were raised, helping to push projected global stocks up sharply. China's projected imports, already massive, were raised by another 1 million tonnes to 74 million, representing about two-thirds of global trade in the commodity.
(Reporting by Ros Krasny; Editing by Andrea Ricci, Jonathan Oatis and Chris Reese)