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.

Corn Futures Fluctuated on CBOT

Corn futures fluctuated by the maximum allowed on the Chicago Board of Trade after six of the past seven quarterly reports, with an average swing of 5.8 percent. Stockpiles (UGRSCNTO) are getting harder to predict as growers build more silos on their land rather than sending it to commercial grain elevators, making it more difficult to measure.

“Analysts’ errors have swung from too low to too high with increasing amplitude,” said William Tierney, the chief economist for Chicago-based research company AgResource Co. and a former USDA analyst. “The industry has to do a better job.”

Stockpiles probably totaled 6.16 billion bushels as of March 1, 5.6 percent lower than a year earlier, according to the average of 26 analysts surveyed by Bloomberg last week. The 6.5 percent plunge in the average U.S. cash price after the Jan. 12 report erased $3.73 billion from the value of stockpiles, data compiled by Bloomberg shows.

Corn futures have dropped 4.8 percent from a six-month high of $6.7575 a bushel on March 19, erasing this year’s gain. The grain last traded at $6.4325 and Societe Generale said in a March 19 report that prices may reach $7 in the second quarter.

The Standard & Poor’s GSCI Spot Index of 24 commodities rose 9.2 percent since the end of December as the MSCI All- Country World Index of equities gained 12 percent. Treasuries lost 1.4 percent, a Bank of America Corp. index shows. Food costs tracked by the United Nations rose for a second month in February and are within 9.5 percent of the record reached a year ago.

U.S. farmers, the world’s biggest agricultural exporters, reported record cash income of $108.7 billion last year, according to the USDA. They used some of that to build more storage, taking on-farm capacity to 12.78 billion bushels as of Dec. 1, the most since 1989, government data show. The 11 percent expansion since 2006 compares with a 15 percent advance in commercial storage to 10.11 billion bushels.

Adding grain bins gives growers more control over when they sell crops, and that pricing power is increasing after global output fell short of demand in eight of the past 12 years, said Dale Durchholz, the senior market analyst at AgriVisor LLC in Bloomington, Illinois.

Unusually wet and cold weather reduced the quality and weight of the crop in 2009, he said. Hot and dry weather in the past two years reduced yields while increasing the weight, he said. Farmers get paid for a 56-pound bushel of corn. The quarterly grain stocks estimates are based on surveys of producers and commercial grain companies.

“Estimating on-farm inventories is a problem because of the differences in the quality of the crops the past three years,” Durchholz said. “When the government asked farmers how much grain they have in storage, they don’t know the correct answer because of the variable weight of the crop.”

Corn Futures Higher on Support Soybeans and Export Demand

Corn futures end higher on support from soybeans and recent strong export demand. The USDA reported fresh exports to South Korea, which while not a surprise, bolstered optimism that exports were picking up amid supply disruptions in South America and the Black Sea region. Meanwhile, corn is struggling to keep pace with soybeans, which rallied again on exports and the Brazil crop. US corn acreage could slip if prices fall versus soy, although traders say corn acreage will increase substantially from last year regardless. CBOT March corn ends up 5 1/2c at $6.41 3/4 a bushel, gaining 10c on the week.

Corn demand from ethanol is expected to drop by 75 million bushels over the next two years, according to USDA’s recently released baseline for 2012-2021. A 75-million-bushel decrease equates to about the same amount of corn that either Arkansas or Louisiana produced in 2011.

To make up for that loss, some analysts think a new demand source is needed if prices are to remain in the current price range.

Corn for May delivery climbed 0.8 percent to $6.4475 a bushel in Chicago, taking gains for the most-active contract to 2.1 percent this week.

"Ethanol production has been slowing over the past few months," notes Chad Hart, agricultural economist with Iowa State University. According to the recent World Agricultural Supply and Demand Estimates (WASDE), corn demand for ethanol production is expected to drop by about 21 million bushels for the current marketing year, compared to the 2010-11 marketing year.

So how much of ethanol’s current and expected slowdown is due to the expiration of the Volumetric Ethanol Excise Tax Credit, also known as VEETC or the blender’s credit? Not much, says Hart. "The ethanol industry is stabilizing. We aren’t building any new plants right now," he says. "And given that new plants are not being built, you wouldn’t expect demand to increase."

In its recently released baseline projections, USDA has corn demand for ethanol production falling from 5 billion bushels for the 2011-12 crop to 4.95 billion bushels for the 2012-13 crop and and 4.925 billion bushels for the 2013-14 crop. USDA expects demand for corn from ethanol plants to begin increasing after that, reaching 5.1 billion bushels by the end of the baseline period.

"Smaller gains for corn-based ethanol are projected over the next 10 years than have occurred in recent years," USDA says in its baseline commentary. USDA attributes weakening demand to overall declines in gasoline consumption in the United States, constraints in the E15 market, and the small size of the E85 market. "Nonetheless, a strong presence of ethanol in the sector continues, with about 36 percent of total corn use expected to go to ethanol production during the projection period," USDA states. For the 2011-12 crop, corn demand for ethanol is estimated to use just over 40 percent of the total U.S. corn crop.

Credits given to gasoline blenders who have blended more ethanol into their gasoline blends than required by the federal Renewable Fuel Standard have been building. "Each and every year, we’ve produced extra credits, which typically overhang the market in the early part of the year," says Hart. If gasoline demand declines enough to pressure gas prices substantially lower, Hart says the build in credits could really depress corn demand for ethanol.

"What should concern the ethanol industry is another recession," says Hart. "In 2008, fuel prices were low enough that blenders backed off and small ethanol plants had to shut down."

Some analysts worry that if U.S. corn yields return to trend-line levels near 175 bushels per acre another demand source will be needed with corn acreage continuing to climb in the United States and elsewhere in the world.

Hart agrees. "If you are trying to hang onto $6 per bushel corn, you do need a new demand source," he says. He predicts that average corn prices will move into the $4.00 to $4.50 per bushel price range over the next decade. USDA’s baseline puts average prices between $4.30 and $4.60 from now until 2022. For the decade beginning in 2000, the average cash corn price was $3.10 per bushel, but prices ranged between $1.97 and $5.40.

Corn Futures Prices Plunge 40 Cents

Corn futures prices plunged 40 cents Thursday morning to a little over $6.11/bushel as traders reacted to an earlier crops report forecasting a smaller-than-expected drop in inventories. In a reversal of historic patterns, the price of corn is higher than wheat, an anomaly that is upending commodities-trading strategies and changing what poultry producers feed their chickens.

Tyson Foods Inc. and Pilgrim's Pride Corp., which together process 3.7 billion chickens a year, have begun sprinkling wheat into chicken feed, traditionally a corn-based concoction. Livestock and ethanol producers also are turning to wheat as a supplement to corn.

The changes are a response to a surge in the price of corn relative to wheat.

Corn prices plunged Thursday after a government report said production nationwide last year was better than anticipated.

Local producers and commodity experts aren't in panic mode. Sources say the recent price correction is likely temporary because corn supplies are still tight.

Corn for March delivery closed at $6.115 per bushel Thursday -- 40 cents down from the open, which is the limit -- on the Chicago Board of Trade. On Friday, prices dropped a couple of more cents.

The nose-dive occurred after the final 2011 Crop Production Report was released by the U.S. Department of Agriculture. Corn production is pegged at 12.4 billion bushels, about 100 million bushels more than November estimates.

The increase, along with soft exports, don't have corn buyers in a generous mood as of late.

"The export market has been lacking. Japan has turned to the Black Sea market -- Russia and the Ukraine. Our dollar is going up compared to the euro, making our commodities more expensive," said Rylan Zwanziger, grain originator for East Central Iowa Cooperative based in Hudson.

Projected corn exports for 2011/12 are 1.65 billion bushels, according to the report. The U.S. shipped 1.84 billion bushels abroad during the past marketing year.

Despite producing the fourth-largest corn crop on record, demand is expected to eclipse production by about 300 million bushels. Corn ending stocks are estimated at 846 million bushels for 2011/12. Anything under 1 billion bushels is cause for concern, experts say.

"Supplies are still tight. Traders (in the long term) are looking strictly at carry-out," Zwanziger said.

Jim Grady, a rural Waterloo farmer, is keeping close tabs on the market since he has corn yet to sell. Grady is optimistic they will rebound.

Corn-on-corn production has been disappointing of late, he said. Many farmers will likely return to a traditional corn/soybean crop rotation, Grady believes, which will shift acres this year to soybeans, putting pressure on corn. Plus, tight supplies and flood-damaged land is likely to work the advantage of sellers.

"I think (prices) will come back. ... A lot can change" in the next few months, Grady said.

Iowa producers harvested 2.36 billion bushels of corn, up 9 percent from 2010, the report said. The average yield statewide was 172 bushels per acre.

U.S. soybean production in 2011 totaled 3.06 billion bushels, according to the report. That's up slightly from the Nov. 1 forecast, but down 8 percent from 2010. The crop is the sixth largest on record.

The state's farmers brought in 466 million bushels of beans last fall, down 6 percent from 2010.

The report didn't have as much of a negative affect initially on soybean prices as corn. March soybeans closed at $12.03 on Thursday, down 29 cents from the previous day. Friday's close was $11.64.

Two years of high commodity prices, while good for row-crop farmers, have hurt livestock producers. Hog producer Max Schmidt of rural Elma said the recent price rollbacks help.

A 40-cent drop in corn means an extra $4 when selling a hog, the past president of the Iowa Pork Producers Association said. Right now, Schmidt said that's the difference between red ink and black.

The price of corn plunged Thursday after the government said corn supplies were higher than traders expected. Investors had bid the price up, expecting tighter supplies because of weather damage to crops.

Corn for March delivery fell 40 cents, or 6.1 percent, to $6.115 per bushel. The price has fallen 24 percent from June, when concerns about a potential shortage sent the price to a record $7.99.

The Agriculture Department said farmers produced 12.358 billion bushels of corn last year, slightly higher than its estimate a month ago. It predicted supplies will drop 2 million bushels to 846 million bushels by the end of this year's harvest. Analysts said traders had expected that number to be closer to 750 million bushels.

The U.S. Agriculture Department forecast would still leave both domestic and global supplies at fairly tight levels by summer's end.

The global corn supply forecast was little changed at 128.14 million metric tons. The agency said losses in Argentina due to dry weather should be offset by increased production in the United States, parts of Europe and Russia compared with a year ago.

"Everything in this report was bearish — yes, short-term maybe, but long-term, I'm still very bullish," said John Sanow, an analyst with Telvent DTN. "Demand remains very strong."

Wheat and soybean prices also fell, partly because of the drop in the price of corn. March wheat fell 36 cents, or 5.6 percent, to finish at $6.05 per bushel, while soybeans ended down 20.5 cents, or 1.7 percent, at $11.825 per bushel.

In other trading, metals prices were mostly higher after strong bond auctions in Spain and Italy. Investors were more optimistic about improving demand, particularly if Europe can gain control over its financial crisis.

Gold for February delivery rose $8.10 to finish at $1,647.70 an ounce. In March contracts, silver increased 23.4 cents to end at $30.124 per ounce, copper rose 10.3 cents to $3.649 per pound, and palladium fell $4.40 to $641.25 per ounce. April platinum settled up $2.40 at $1,500.10 an ounce.

Benchmark oil fell $1.77 to finish at $99.10 per barrel on the New York Mercantile Exchange. Heating oil dropped 1.05 cents to $3.0541 per gallon, gasoline futures fell 3.2 cents to $2.7313 per gallon, and natural gas decreased 6.6 cents to $2.737 per 1,000 cubic feet.

Orange juice futures continued to plummet. They rose to their highest since 2007 earlier this week after the Food and Drug Administration said it was testing shipments for a fungicide that had been found in low levels in orange juice. Investors have taken profits since then. Orange juice for March delivery fell 10 cents, or 5.3 percent, to $1.781 per pound.

US corn stocks are to fall 2 million bushels in January as increased export demand is expected to offset a rise in production, according to the World Agricultural Supply and Demand Estimate report released by the US Department of Agriculture.

"Basically, the report did not live up to expectations," said a market source, adding that the "market had already priced in the expectation, so now it's reacting."

As a jump in demand slightly outpaces a rise in supply, the projected total ending stocks for US corn in January edged down 2 million bushels from the December projection to 846 million bushels, according to USDA.

Specifically, the yield per harvested acre grew from a projection of 146.7 bushels/harvested acre in December to 147.2 bushels/harvested acre in January. Combined with the acreage harvested, which edged up 100,000 acres to a projection of 84 million acres in January, the higher yield led to a production growth of 48 million bushels to a projection of 12.358 billion bushels in January. The larger production figure in turn caused the total supply projection for January to increase to 13.501 billion bushels from a projection of 13.453 billion bushels in December.

But, the increase in the January projection for total US corn supply was offset by the export projection for January that was 50 million bushels higher than December at 1.65 billion bushels, causing the total corn demand figure to also rise 50 million bushels to 12.655 billion bushels. The projection in January for the amount of corn used for ethanol production was static at 5 billion bushels.

The crops report also mentioned a lower corn production estimate, down 3 million tons, for Argentina in the 2011/12 harvest season due to periods of extreme heat in December and January that have reduced yield prospects. The unfavorable weather conditions in Argentina were cited by sources to be one of the main factors for recent strength of corn futures on the Chicago Board of Trade. Argentina is the world's second-largest exporter of corn behind the US.

Unlike corn, stocks for soybean and soybean oil -- feedstocks for biodiesel production (soy methyl ester) -- are projected by the USDA to be higher in January on reduced export demand.

The US soybean January production projection was 10 million bushels higher at 3.056 billion bushels due to an increase in the yield per harvested acre to 41.5 bushels/harvested acre from 41.3 bushels/harvested acre in December, even as the projected acreage harvested edged down 100,000 acres to 73.6 million acres. The higher production figure resulted in a growth of 11 million bushels in the total US soybean supply projection for January to 3.286 billion bushels.

On the demand side, exports decreased 25 million bushels from December to 1.275 billion bushels, while crushings dropped 10 million bushels to 1.615 billion bushels. These two declines resulted in a total demand estimate of 3.011 billion bushels in January, down 34 billion bushels from the December estimate.

As estimates of total demand lessened in January and total supply grew, the ending US soybean stocks projection rose 45 million bushels in January to 275 million bushels.

The estimate for total supply of US soybean oil in January was down 165 million pounds from December to 21.215 billion pounds as production had a similar loss to 18.605 million pounds in January. Regarding demand, the projection for exports in January shrank 200 million pounds to 1.2 billion pounds as the figure for methyl ester (biodiesel) use remained unchanged at 3.6 billion pounds. As a result, the total demand estimate for US soybean oil lessened to 18.9 billion pounds from 19.1 billion pounds in December.

As the reduction in the export demand estimate for January was greater than the reduction in production, total ending stocks for US soybean oil in January were projected 35 billion pounds higher at 2.315 billion pounds.

The report mentioned that the Argentina soybean crop this season is expected to be down 1.5 million tons to 50.5 million tons and the Brazil soybean crop projection was down 1 million tons to 74 million tons as hot and dry conditions in recent weeks were causing downward revisions of estimates. The strength in soybean futures recently, like corn, were said to mostly be on weather conditions in South America. Brazil is the world's second-largest exporter of soybeans behind the US, while Argentina is the world's third-largest.

On the Chicago Board of Trade, January soybean futures were down 39 cents/bushel to $11.58/bushel and March soybean oil futures were down 1.09 cents/lb to 50.50 cents/lb.

Corn, wheat and soybean futures extended losses after Thursday`s sell-off, which was triggered by bigger-thanexpected supply estimates from the US government.

US commodity markets will be closed on Monday in observance of Martin Luther King Jr. Day.

Fears of a wide-ranging euro zone downgrade by Standard & Poors confirmed by the credit rating agency after most commodities had settled for the day pressured oil and metals prices through the day.

S&P downgraded the credit ratings of nine euro zone coun-tries, stripping France and Austria of their coveted tripleA status but not EU paymaster Germany, in a Black Friday 13th for the troubled single currency area.

`While it should be anti-cli-matic, the realisation will also be sobering. In particular, the flight to the dollar will be accelerated, pushing crude oil prices lower,`