Grain futures hit turbulence, after a benchmark US report lifted expectations for world wheat output, on a record Russian harvest, with the forecast for the domestic soybean crop getting a surprise upgrade to an all-time high.

Chicago soft red winter wheat futures for September extended losses to stand down 3.4% at $7.98 a bushel in the immediate aftermath of the US Department of Agriculture’s monthly Wasde report on world ag supply and demand.

Chicago November soybean futures slid as far as 2.3% to reach $14.15 ¼ a bushel.

However, prices recovered ground later in the session, led by a revival in corn futures, which for December recovered from 1.8% losses to 1.6% gains, on lower-than-expected estimates for both the US and world stocks at the close of 2022-23.

Record harvest

The volatility followed the release of a Wasde which raised by nearly 8.0m tonnes to 779.6m tonnes the forecast for world wheat production in 2022-23, led by a hike of 6.5m tonnes to an all-time high of 8.0m tonnes in the estimate for Russia’s harvest. (The USDA excludes Crimea from its Russia figures.)

“Harvested area increased for both winter and spring wheat on updated area data from Rosstat, Russia’s statistical agency,” the USDA said, pencilling in higher yield figures too.

“Winter wheat yields are raised on harvest results while spring wheat yields increased on generally favourable conditions to date.”

Conditions in Siberia, responsible for 42% of spring wheat production, “are slightly below average due to below-normal rainfall throughout July, but this is not enough to offset the above-average conditions in the rest of the country”.

The USDA lifted its forecast for Australia’s forthcoming wheat harvest too, by 3.0m tonnes to 33.0m tonnes, citing a yield boost from “increasingly favourable weather conditions”.

Suc revisions more than offset limited crop downgrades, including a 2.0m-tonne cut to 132.1m tonnes in the estimate for the European Union crop, with the USDA noting that “drought and high temperatures have taken a toll”.

Record soybean yield

For soybeans, the USDA lifted its forecast for world 2022-23 output by 1.4m tonnes to 392.8m tonnes, reflecting largely increased expectations for the domestic crop.

Rather than cutting its estimate for this year’s US soybean yield, as investors had expected, the USDA raised the forecast by 0.4 bushels per acre to an all-time high of 51.9 bushels per acre.

The forecast for the harvest was thus also unexpectedly upgraded, to an all-time top of 4.53bn bushels (123.3m tonnes).

Although some of the extra output was swallowed up by an increase in the US soybean export forecast, the estimate for the country’s stocks at the close of 2022-23 was lifted by 15m bushels to 245m bushels, in contrast to investor expectations for a flat figure.

‘Searing heat and widespread drought’

For corn, the Wasde was more supportive for prices, cutting the estimate for US corn stocks at the close of 2022-23 by 82m bushels to 1.39bn bushels – a bigger downgrade than investors had expected.

The extent of the revision reflected a below-expectation harvest estimate, of 14.36bn bushels, as the USDA pegged the yield at 175.4 bushels per acre, falling below last year’s high by more than investors had prepared for.

With an 8.0m-tonne downgrade too to expectations for corn output in the European Union – where “searing heat and widespread drought during pollination and tasselling has significantly diminished” prospects – the world stocks estimate was also cut by more than investors had pencilled in.

‘Devastated by drought’

Within the EU, the forecast for Romania’s crop alone was slashed by 3.0m tonnes to 10.0m tonnes, after “dryness intensified nationwide during July and now covers all of the country’s major growing regions”.

In Italy – where the “primary agricultural region, centred on the Po River Valley in the north, continues to be devastated by drought and low water levels – the harvest was downgraded by 700,000 tonnes to a 50-year low of 4.8m tonnes.

French corn production was pegged at 12.0m tonnes, a 1.2m-tonne downgrade from last month, “as heat and dryness has limited development, particularly in the concentrated corn region of its southwest”.

Earlier on Friday, FranceAgriMer data showed 53% of the French corn crop in “good” or “excellent” condition, a drop of 9 points week on week and the lowest rating for the time of year on data going back to 2011.