Lowering of corn crop estimates leads to rising prices

The latest forecast report published by the US Department of Agriculture (USDA) on Friday drove up the corn price in Chicago, which closed 3.4% higher. The USDA reduced its estimate for average yields in the US and thus cut its US production figure by 2.5 million tons accordingly. 

It slashed its EU crop estimate by nearly twice as much, however, meaning that the USDA's estimate of 58 million tons is now only just shy of the European Commission's. As compared with the previous month, the global crop was only reduced by less than 1% nonetheless, and at 978 million tons is set to remain just 3% below the previous year's record level. 

"That said, this decline is sufficient to generate a 7.5 million ton deficit in 2015/16. In the case of wheat, on the other hand, the assumption that prevailed in the early summer that the global market would be balanced in 2015/16 has been abandoned in favour of a surplus that is now estimated at 15 million tons", says Commerzbank. 

At 731.6 million tons, global production looks set to exceed the previous year's record by a good 6 million tons. The EU wheat crop was raised by over 6 million tons as compared with the August estimate, while the figures for Russia and Ukraine were also upwardly revised, meaning that the 1.5 million ton reduction for Canada was of virtually no significance. 

Wheat therefore has the increase in price of its rival corn to thank for its 1.5% gain on Friday. For the EU, however, the USDA's figure of 154 million tons now is considerably higher than that of the European Commission, which estimates 148.5 million tons.