Corn Futures Rose on CBOT, Prices Surge

Corn futures for December delivery rose and corn prices surged after United State of America inventories plunge in domestic. Futures delivery rose by the 40-cent on CBOT. The USDA this month predicted a harvest of 10.727 billion bushels, a drop of 13 percent from last year and down from 10.779 billion forecast in August. The agency, which had been predicting a record crop in June, before the drought, will update its projections for major crops on Oct. 11.

Dry weather allowed farmers before Sept. 1 to collect grain that normally isn’t ready until October. The government said that 1.2 billion bushels of this year’s crop were available for consumption before Sept. 1, about 700 million more than a year earlier. Today’s stockpile tally showed a decline from the USDA’s Sept. 12 report, when the agency predicted an increase to 1.181 billion bushels because some of this year’s harvest may have been consumed in place of the 2011 crop.

Corn prices have surged 49 percent since mid-June, boosting costs that already are forcing output cuts by meat companies including Sanderson Farms Inc. (SAFM) and ethanol makers including Valero Energy Corp. (VLO). Stockpiles left from last year’s harvest in the U.S., the world’s biggest grower and exporter, totaled 988 million bushels on Sept. 1, down 12 percent from 1.128 billion a year earlier, the U.S. Department of Agriculture said today in a report. Wheat inventories fell to a four-year low, and sorghum reserves were the smallest since 1996, the agency said.

Grain supplies were tightening as record Midwest heat in June and July sparked the worst drought since 1956, causing crop damage that insurers estimate may double payouts to U.S. farmers this year to more than $20 billion. “With corn inventories less than a billion bushels and wheat and sorghum stocks also shrinking, the grain trade is looking at a very tight supply situation,” Mark Schultz, the chief analyst for Northstar Commodity Investment Co. in Minneapolis, said in a telephone interview. “This report signals that demand has not slowed, shifting the focus to the smaller harvest expected this year.”

Rabobank said in an e-mailed report today that the inventory estimate probably includes some grain from the 2012 crop, suggesting feed demand was larger than implied in the government report. Production this year probably will drop to 10.2 billion bushels, or 4.9 percent less than the USDA forecast, the bank said.

The government probably will boost its price forecast, which would “be bullish for CBOT corn futures,” Rabobank analysts including Luke Chandler said in the report today.

Declining U.S. output will reduce global supplies by 4.9 percent from a year earlier, the International Grains Council said today. World growers will harvest 833 million metric tons in the 2012-2013 crop year, down from 875 million the previous year, the London-based council said. World inventories before next year’s harvest will fall to 118 million tons from 135 million estimated this year, the council said.