Corn futures ended higher Friday, finding support a day after settling at the lowest since January, as USDA lifted its U.S. production forecast, but also raised demand expectations for the commodity.

In its monthly World Agricultural Supply and Demand Estimates report, the USDA raised its outlook on 2021/2022 U.S. corn production by 246 million bushels to 15 billion bushels, citing “increases to harvested area and yield.”

The government agency also lifted its forecast for total U.S. corn use for the 2021/2022 marketing year by 150 million bushels to 14.8 billion bushels.

“Corn yields and production hit the highest end of expectations,” said Sal Gilbertie, president and chief investment officer at Teucrium Trading. “The corn yield per acres was raised a bit, probably because the eastern and southern corn growing areas of the U.S. are expected to have really good yields” — partially offsetting the very poor yields expected for corn in the Dakotas, he told MarketWatch.

The most-active December corn contract
CZ21,
+1.27%

C00,
+1.27%

traded lower in the immediate aftermath of the USDA report, then moved up by 7 1/2 cents, or 1.5%, to settle at $5.17 1/2 a bushel in Chicago.

Corn prices climbed after four-consecutive sessions of losses, with Thursday’s settlement at $5.10 the lowest for most-active contract since Jan. 22, according to FactSet data.

“While we expected USDA to raise the [corn] ending stock level , we are slightly surprised by the amount,” said Darwei Kung, head of commodities and portfolio manager at DWS Group. The USDA lifted 2021/2022 U.S. corn ending stocks to 1.408 million bushels from 1.242 million bushels.

“We expect the market to digest the full report over the weekend,” Kung told MarketWatch. “The key question for us now is how will demand evolve into 2022 as COVID-19 recovery process continues into the end of the year.”

Wheat futures, meanwhile, declined Friday to their lowest finish since late July. The most-active December wheat contract
WZ21,
-0.54%

W00,
-0.54%

settled at $6.88 1/2 a bushel, down 3 3/4 cents, or 0.5%.

Total 2021/2022 U.S. wheat supplies was forecast at 72.82 million metric tons, down from the 73.09 million metric tons August forecast, according to the USDA. U.S. wheat ending stocks for the marketing year was forecast at 16.73 million metric tons, down from the previous forecast of 17.05 million metric tons.

The low level of wheat ending inventories was “widely expected”, said Gilbertie, adding that wheat ending inventories would be the lowest seen since the 2013/2014 crop year.

November soybeans
SX21,
+1.42%

S00,
+1.42%
,
meanwhile, moved up by 16 cents, or 1.3%, to $12.86 1/2 a bushel, for the highest finish in a week.

The domestic U.S. soybean balance sheet “remains low relative to historical levels, which is likely why soybeans are showing the most post-report strength,” said Gilbertie.

The USDA also lifted its 2021/2022 U.S. soybean production forecast by 35 million bushels to 4.4 billion bushels, noting that lower harvested area was more than offset by a higher yield forecast.

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