Grain prices hit multi-year lows as US raises supply forecasts

CHICAGO, July 12 (Reuters): Grain prices tumbled to their lowest levels in years on Friday, extending a weeks-long rout after the US Department of Agriculture projected that supplies will significantly exceed expectations.
Crops in the United States, the world's top grain exporter, have flourished this summer thanks to nearly ideal weather, fuelling expectations that bumper autumn harvests will expand crop inventories.
The USDA, in a monthly report, raised its forecast for the US soybean harvest by 4.5 per cent to a record 3.8 billion bushels, topping analysts' expectations by 0.7 per cent.
The US corn harvest was projected at 13.86 billion bushels, down slightly from last month but near last year's record. A record yield estimate of 165.3 bushels per acre will likely rise even higher due to mild temperatures and rainfall, analysts said.
"This corn has never had any stress in its life," said Paul Butler, a farmer who grows corn and soy near Macon, Ill.
Reduced demand for animal feed helped lift grain inventories, which have been replenished following a historic US drought in 2012.
The USDA raised its estimate for US corn inventories at the end of August by 8 per cent from June to 1.246 billion bushels, topping analysts' expectations by 1 per cent. The agency increased its forecast for soybean inventories by 12 per cent to 140 million bushels, exceeding expectations by 9 per cent.
By Aug. 31, 2015, US corn inventories should reach 1.801 billion bushels and soybean stocks should be an eight-year high of 415 million, according to USDA data.
The agency hiked its estimate for global 2014/15 corn and soybean ending stocks by about 3 per cent each from June, to 188.05 million tons and 85.31 million, respectively. World wheat ending stocks were estimated at 189.54 million tons, up 0.5 per cent from last month.
"There was nothing positive," said Don Roose, president of US Commodities in Iowa, about USDA's data.
Chicago Board of Trade July corn futures ended down 3/4 cent at $3.99-3/4 a bushel after trading as low as $3.94, the lowest price since August 2010. December corn futures, which represent the crop that will be harvested this fall, slumped 8 cents to $3.84-3/4 a bushel after setting a contract low of $3.82-1/2.
The new-crop contract has lost 14 per cent since the USDA on June 30 said corn stocks as of June 1 were bigger than expected.
Front-month soybean futures sank 34 cents to $12.95-3/4 a bushel after falling as low as $12.49-1/4, the lowest price since February 2012. New-crop November soybeans futures dropped 18 cents to $10.75 a bushel after setting a contract low of $10.65.
September wheat futures slid 22-1/2 cents to $5.26 a bushel, after prices hit a contract low of $5.25 a bushel.
Butler, the Illinois farmer, said the drop in prices made him wish he had waited to buy farm equipment he purchased earlier this year.
"It stinks," he said about the decline.
Prices are expected to weaken further due to favourable growing conditions. Updated weather models look "near perfect" across the US Corn Belt during the key pollination stage of development for corn, said Karl Setzer, grain solutions team leader for MaxYield Cooperative in Iowa.
Terry Reilly, senior commodity analyst for Futures International in Chicago, predicted December corn will drop to $3.25 a bushel by autumn and November soybeans will hit $9.50.
Some farmers are starting to panic about the setback because they still have corn from last year's harvest to sell, said Jason Britt, president of Central States Commodities in Kansas City.
"They've got some old-crop supplies they don't want to dump on the market," Britt said. "They're looking out their back door and seeing a very good crop."