Commodities Corner: Soybean futures end nearly flat, but hold near 3-month high as USDA cuts production estimate

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Soybean futures gave up early gains on Thursday to end almost flat, but remained near their highest level in three months after the U.S. Department of Agriculture cut the estimated size of this year’s crop, citing lower yields.

The USDA “lowered planted acres, harvested acres, and yield” on soybeans, said Craig Turner, senior commodities broker with Daniels Trading. “All changes were bullish for soybeans.”

Soybean production for the 2019/2020 marketing year is forecast at 3.6 billion bushels, down 83 million bushels, while endings stocks are seen at 460 million bushels down 180 million bushels, from the September forecast, the USDA said in data, including its World Agricultural Supply and Demand Estimates report, issued Thursday.

“The USDA has lowered ending stocks to a level matching 44% of what was projected only four months ago” by the USDA’s June WASDE report, said Sal Gilbertie, president at Teucrium Trading.

“The soybean balance sheet is tightening dramatically, but the markets are not responding, probably due to uncertainties regarding the trade war,” he told MarketWatch. “Demand for soybeans remains strong, which indicates something in the market has to give.”

Still, prices for soybeans gave up their earlier gains, likely dragged down by the loss in corn, said Gilbertie. Corn, which fell over 3% Thursday, is “still king and it will drag the price of beans along with it in either direction.”

“Investors might have an opportunity here given the fundamentals versus the price action—they simply don’t mesh up right now,” he said.

In Chicago, November soybeans SX19, -0.14%  settled at $9.23 ½ a bushel, down 1/4 cent, or 0.03%, after trading as high as $9.34 during the session. Prices had already climbed a day earlier in anticipation of the USDA report, settling at $9.23 3/4, which was the highest for a most-active contract since July 12 of this year, according to FactSet data.

Meanwhile, corn futures dropped even as the USDA said corn production is forecast at 13.779 billion bushels, down 20 million bushels from the previous forecast.

The report also pegged expected yield per harvested acre at 168.4 bushels, up slightly from the 168.2 bushels September report estimate.

“The trade expected even lower numbers [on corn production] and few expected the USDA to raise the corn yield, no matter how slightly,” said Gilbertie.

December corn CZ19, -3.61%  lost 14 cents, or 3.6%, to close at $3.80 1/4 a bushel.

Rounding out action in grain futures, December wheat WZ19, -1.80%  settled at $4.93 a bushel, down 7 1/4 cents, or 1.5%.

The USDA reduced its wheat production estimate for the 2019/2020 marketing year to 1,962 million bushels, down 18.5 million bushels.