International grains markets posted further good gains last week mainly on dryness across Europe, but also on concerns for US crop yields. The USDA global S&D report released on Friday night essentially confirmed traders thoughts that global coarse grain stocks are on the retreat and that strong US corn yields will be necessary to prevent further tightness.
On this, the outlook for US summer crop yields has turned lower in recent weeks. After traveling portions of the central and western Corn Belt, US ProFarmer crop consultant, Dr. Cordonnier sees the USDA eventually cutting its estimates of harvested corn and soybean acres from the June Acreage Report. He also lowered his national corn yield estimate last week to 161bu/ac, putting his corn crop peg at 12.99 billion bushels (2% lower than USDA’s estimate of 13.245 billion bu).
Ideas of sliding US corn yields are menacing given that the USDA has just made a sizable reduction to global coarse grain stocks and yields given recent production issues in Canada, China and Europe.
Dr. Cordonnier also dropped his US soybean yield estimate to 41bu/ac and his bean crop estimate to 3.17 billion bushels (vs USDA at 3.345 billion bushels). Ideas on US soybean yields are being curtailed at the same time Canada is confirming weaker canola production. Late last week Agriculture Canada put the 2010 Canadian canola crop at 10.5mmt, down from 11.7mmt in its last update. With the weather in Europe also turning sour for yields, global oilseed production is under pressure as well.
The outlier to current trends in coarse grain and oilseeds is wheat. Despite the USDA reporting last Friday that US wheat stocks at the end of 2010/11 will be the highest since 1987, wheat prices gained another 7% last week riding on the coattails of higher corn and oilseed prices. Wheat is currently by far the weakest link in the grain chain. Unless harvest results in Europe confirm that yields have been damaged by the recent hot and dry weather, look for wheat values to ease vis-a-via other grains to attract feeding demand.