Chicago Grains Crash, Led By Beans

12/08/15 -- Soycomplex: Beans closed with steep losses, caught off guard by a bearish USDA report that the majority of the trade didn't see coming - especially fund money which finds itself left holding the baby again - long and wrong. The first USDA surprise was a 0.9 bu/acre hike in US soybean yields this year to 46.9 bu/acre. The trade was expecting them to be lowered to somewhere in the 44-45 bu/acre region. If the USDA are correct then yields are now less than a bushel/acre off last season's record. Plantings were reduced, but at 800k acres not by as much as the 1.2-2.0 million that the majority of the trade thought likely. US production was pegged at 3.916 billion bushels, up from 3.885 billion in July. The average trade guess was for a fall to 3.724 billion. The next big shock for the trade was new crop ending stocks rising to 470 million bushels, up from 425 million bushels the previous month and contrary to trade expectations for a drop to around 300-325 million. Global new-crop stocks fell to 86.88 MMT, down from 91.80 MMT previously, but up from 80.6 MMT in 2014/15. Production in Brazil (97 MMT) and Argentina (57 MMT) in 2015/16 was held steady. China's import needs were raised 1.5 MMT to a new high 79 MMT. Following yesterday's shock Chinese currency devaluation the shaky soybean market desperately needed a bullish USDA report to provide some support today. It didn't get it and hence the market quickly turned into what looked like the opening sequences from Saving Private Ryan. The trade may well ultimately prove to have been correct with their forecasts, but it was probably unrealistic to expect the USDA to go along with them as early as August. Trade ideas for tomorrow's weekly export sales report from beans are in the 550,000 and 1,250,000 MT region. Aug 15 Soybeans closed at $9.51, down 63 cents; Nov 15 Soybeans closed at $9.10, down 61 1/2 cents; Aug 15 Soybean Meal closed at $335.90, down $12.00; Aug 15 Soybean Oil closed at 29.03, down 105 points and the lowest close for a front month since late 2008.

Corn: The market closed the best part of 20 cents easier. The USDA stunned the trade with a 2 bu/acre hike in potential US corn yields this year. The market was anticipating these being lowered to around 164.5 bu/acre but instead got a figure of 168.8 bu/acre. That took production up to 13.686 billion bushels from 13.530 billion previously and above the average guess of 13.332 billion bushels in a recent Bloomberg survey. New crop ending stocks increased by 114 million bushels from last month, coming in at 1.713 billion, well above the average trade estimate of 1.424 billion. US corn exported were revised down 1.0 MMT to 47.0 MMT on strong competition from South America. Brazil's exports were increased 1.5 MMT to 28 MMT and Argentina's raised 0.5 MMT to 15.5 MMT. Brazil's 2015/16 crop was hiked 2 MMT to 79 MMT, Ukraine's was increased 1 MMT to 27 MMT and Russia's was increased 0.5 MMT to a new record 13.5 MMT. Global ending stocks went from 190 MMT to 195 MMT versus trade expectations of 187.91 MMT. In other news, The US Energy Dept had US ethanol production for the week ending August 7 at 965,000 barrels/day, up 4,000 barrels/day from the week before. Bloomberg reported that Chinese importers of barley, sorghum, tapioca, dried distillers’ grains will have to apply for import permits for those products from Sep 1. The Chinese government have reportedly been concerned by the large rise in sorghum imports in particular, and are rumoured to be looking for ways to restrict these in favour of shifting some of their own massive corn stockpiles. Trade forecasts for tomorrow's weekly export sales report are around 250,000 and 850,000 MT. Kazakhstan's Ag Ministry estimated the nation's 2015/16 grain exports at 8.0 MMT versus a previous estimate of 7.0 MMT and up from 6.4 MMT in 2014/15. Their 2015 harvest is said to be 5.5% complete on 817k ha, producing a crop of 1.34 MMT so far. Agritel said that Ukraine's corn production potential this year is 26 MMT, although they note than recent 35C+ temperatures have come during grain fill time, which may take the shine off final yields. Sep 15 Corn closed at $3.57 1/4, down 19 1/4 cents; Dec 15 Corn closed at $3.68, down 19 1/2 cents.

Wheat: The market closed around 10-15 cents lower across the three exchanges. The USDA pegged 2015 US all wheat production at 2.136 billion bushels, down 12 million from July and 17 million below the average trade guess. They lowered US exports this season from 26.25 MMT to 25 MMT. "Global production in 2015/16 is raised to a record as larger crops in Kazakhstan, Russia, Turkey, and Ukraine more than offset lower production in Argentina, Canada, and the United States. Global trade is down slightly, highlighted by smaller imports for Iran and Libya, which more than offset increases for Morocco and Turkey. Exports are raised for Russia and Ukraine but cut for the United States and Canada," they said. The global wheat crop was raised from 722 MMT to 726.5 MMT, which now beats last year's record by more than 1 MMT. World ending stocks were upped from 219.8 MMT to 221.5 MMT. Russian wheat production was raised 3 MMT to 60 MMT, and their exports increased 1 MMT to a new record 23 MMT. Forecasts for tomorrow's weekly export sales are between 300,000 and 725,000 MT. Egypt tendered for wheat for late September shipment, with the results expected tomorrow. It will be interesting to see where Black Sea and EU offers line up, especially those out of Russia given the existing uncertainty over the current export duty on wheat. It will also be interesting to see what volume they buy. Despite prices being at their lowest in years in their last tender they only finished up buying a couple of cargoes. Whether that's because the feel that the market is coming lower, or due to lack of cash is unclear. In Ukraine, where the early grain harvest (which excludes corn) is already just about over, they've produced a crop of 35.7 MMT so far out of a anticipated final harvest estimate of 60 MMT from the Ag Ministry. Russia's Deputy PM said that the country will harvest 100 MMT "or more" grain this year, pegging export potential at 25-27 MMT. He said that there were no plans to introduce a limit on exports. Sep 15 CBOT Wheat closed at $4.92 1/4, down 15 cents; Sep 15 KCBT Wheat closed at $4.75 1/4, down 12 3/4 cents; Sep 15 MGEX Wheat closed at $5.09 1/2, down 9 3/4 cents.