USDA Concern Supply, Future Soybean and Corn Soar

Corn futures soared the daily 30-cent limit and soybean prices also rallied sharply after government data exacerbated concern over dwindling U.S. grain stockpiles in Chicago.

The nation?s corn and soybean supplies at the beginning of March fell to unexpectedly low levels, based on a U.S. Department of Agriculture report released earlier March 31. In a separate report, the USDA said it expects American farmers to reduce soybean plantings this spring, though corn acreage will rise to the second-highest total since the end of World War II.

With the spring planting season just beginning and harvest six months away, today?s reports only fueled anxiety over tight corn and soybean supplies, traders and analysts said. Demand from ethanol makers, livestock feeders and exporters remains strong, leaving little margin for error during the upcoming growing season.

Supplies are ?razor-thin,? said Matthew Connelly, a corn options broker on the CME Group trading floor in Chicago. ?If we go from a wet, cool spring to a hot, dry summer, that?s not good. That will get things going? in the grain markets.

If Midwest weather turns unfavorable, ?we could be talking about $10 corn and $20 soybeans,? Connelly said.

In trading March 31, corn futures contracts for delivery from May through July 2012 all rose 30 cents, the maximum daily move allowed by CME. May futures settled at $6.93 ? a bushel and December ended at $6.25 ?. Corn futures reached a 32-month high of $7.35 on March 4.

May soybean futures rose 38 ? cents to $14.10 ? a bushel, while November futures rose 31 ? cents to $13.95.

Farmers favoring corn over soybeans

Corn prices were the top-performer among major U.S. grains last year - rising 52 percent, based on CME futures - and the market continued to soar in 2011. High prices have boosted expected returns from planting corn compared with other crops, encouraging more acreage, the USDA said in its annual Prospective Plantings report March 31.

Farmers will plant an estimated 92.18 million acres to corn, up 4.5 percent from 88.19 million in 2010, the USDA said. The projected acreage for 2011 would trail only 2007 plantings of 93.5 million acres as the highest total since 1944.

Analysts on average expected corn plantings at about 91.8 million acres, based on a Dow Jones Newswires survey.

Much of the increase in corn will come at the expense of soybeans. Iowa, Kansas, Mississippi, Nebraska and Ohio are among states where farmers are expected to plant more ground to corn and less to soybeans. In North and South Dakota, corn acres are projected to surge 22 percent and 19 percent, respectively, according to the USDA.

Nationwide soybean plantings are estimated at 76.61 million acres, down 1 percent from 77.4 million last year but still the third-highest acreage on record, according to the USDA. Based on the Dow Jones survey, soybean plantings were estimated at 76.9 million acres.

While big corn acreage could lead to a record crop this fall, shorter-term supply concerns remain a primary focus for traders and analysts. By the end of the 2010-11 marketing year Aug. 31, U.S. corn stocks are expected to reach the lowest level in 15 years.

Jack Scoville, an analyst with Price Futures Group in Chicago, said lower-than-expected stocks figures for corn and soybeans will keep markets ?more attuned to weather developments? this spring and summer.

?We?re going to need really good weather, even with all these acres being planted to corn,? Scoville said during a March 31 press briefing at CME following the release of the USDA reports.

Recent corn purchases by exporters as well as livestock feeders has stayed firm even at high prices, Scoville said. Livestock buyers ?weren?t too thrilled with $7 (corn), but they paid it,? he said. ?They seem to be able to make those numbers work.?

In its Quarterly Stocks report, the USDA said U.S. corn supplies as of March 1 totaled 6.52 billion bushels, down 15 percent from the same date a year earlier. Soybean stocks totaled 1.25 billion bushels, down 1.6 percent.

March 1 corn and soybean supplies were about 180 million bushels and 46 million bushels, respectively, below analysts? expectations.

The USDA reports signal higher costs for livestock feeders, with many analysts expecting corn futures to climb back above $7 a bushel in coming weeks after tumbling near $6 earlier this month. With expensive feed discouraging herd expansion, cattle and hog prices may rise further.

?Look for livestock markets to advance on prospects for tighter and higher feed supplies, prompting lower weights and more cautious expansion attitude by livestock growers,? Richard Feltes, an analyst with R.J. O?Brien & Associates, said in a March 31 report. ?Today?s report sets stage for highly sensitive, weather-driven markets this summer.?

In late-morning trading, April live cattle futures traded on CME fell 0.175 cent to $1.20375 a pound, after touching a record $1.2165. April lean hog futures fell 0.1 cent to 93.45 cents a pound.

Lower soybean acreage may also push soybean meal prices higher, further raising feed costs for livestock producers.

But some analysts noted that soybean acres could still increase above the USDA?s projection. If a wet spring delays planting, farmers may shift more ground to soybeans, which have a shorter growing season than corn.

The USDA?s soybean plantings estimate, at 76.61 million acres, may be revised higher ?if the weather is indeed cold-wet through the month of April,? Mike Zuzolo, president of Global Commodity Analytics & Consulting, said in a March 31 report. He also sees the projected corn plantings ?as the biggest number we?ll get this spring if the weather doesn?t cooperate.

Trade Soybeans Corn Wheat Lower as Dollar Gain Reduce Demand for Commodities

Soybean futures may open 5 cents to 7 cents a bushel lower on the Chicago Board of Trade as the dollar?s gain reduces demand for commodities as alternative assets, said Greg Grow, the director of agribusiness at Archer Financial Services Inc. in Chicago. Soybean-meal futures may open $2 to $2.50 lower per 2,000 pounds, and soybean oil is expected to open down 0.05 cent to 0.1 cent a pound.
-- Corn futures were called 4 cents to 6 cents a bushel lower as livestock-feed producers shift to cheaper grain, Grow said. Corn prices jumped 33 percent in the third quarter and are up 14 percent this month.
-- Wheat futures may open steady to 2 cents a bushel lower on the CBOT, the Kansas City Board of Trade and the Minneapolis Grain Exchange as the dollar?s rebound erodes the appeal of U.S. exports, Grow said.
-- The United Nations World Food Programme bought $4.23 million of Ukrainian wheat from Nibulon Ltd. for shipping to Bangladesh.
-- Home prices in 20 U.S. cities rose at a slower pace than forecast in August from a year earlier, reflecting slumping sales as the effects of a tax credit waned.
-- Asian currencies weakened for the first time in three days, led by Thailand?s baht, on speculation regional policy makers will counter appreciation as China slows yuan gains.
-- For the second time since he became chairman in 2006, Ben S. Bernanke is leading the Federal Reserve into uncharted monetary territory.
-- The S&P GSCI Spot Index of 24 commodities may gain at least 6.4 percent after the measure climbed above previous resistance levels, according to technical analysis by Barclays Capital.
-- Oil declined for the first time in three days in New York before a report forecast to show that U.S. crude inventories increased last week.
-- The biggest four-month jump in corn prices in 2 1/2 years is signaling to investors BHP Billiton Ltd. will raise its $40 billion bid for Potash Corp. of Saskatchewan Inc., the world?s largest fertilizer producer.
-- China?s stocks dropped from a six-month high, led by consumer companies, on concern an increase in fuel prices will stoke inflation and that recent gains were excessive relative to the outlook for earnings.
-- China, Asia?s biggest oil consumer, increased retail gasoline and diesel prices by 3 percent today as part of government measures to cool the economy and meet energy-saving targets.
-- Russia must raise sowing of spring grains by 23 percent in 2011 to compensate for a drop in winter planting, the Agriculture Ministry said.
-- Ethiopia will lease a land area about the size of Belgium to private investors for growing rice, cotton and other crops aimed at generating foreign-exchange, an Agriculture Ministry official said.
-- Soybean-meal exports from India, Asia?s top supplier of the animal feed, may surge 83 percent this month as farmers boost sales to benefit from prices set for a fourth straight monthly gain, a processors? group said.
-- China has sufficient supplies of cooking oil and a recent surge in wholesale prices of the staple won?t significantly impact consumers, website QQ.com reported, citing Shang Qiangmin, director of the China National Grain & Oils Information Center.
-- Some Chinese soybean crushers have begun to limit the amount of soybean oil they sell to buyers as the bullish sentiment in the market lifts demand for the vegetable oil, the China National Grain & Oils Information Center said in e-mailed report today.
-- China sold 292,200 metric tons of corn, or 29.1 percent of the total 1.01 million tons offered, at auction from state reserves today, the National Grain and Oil Trade Center said.
-- Sugar on China?s Zhengzhou Commodity Exchange gained as much as 2.1 percent today to 6,900 yuan a ton, the highest ever.
-- Cotton on China?s Zhengzhou Commodity Exchange jumped as much as 4.7 percent to 27,500 yuan a ton, the highest level ever.
-- China?s Zhengzhou Commodities Exchange will curb abnormal futures trading from Nov. 8 to protect investors? interests, according to a statement posted on its website yesterday.
-- Australia may have wetter-than-normal weather over the next three months, according to the Bureau of Meteorology, adding to concern that sugar output may be cut while the quality of the wheat crop may be downgraded.
-- AWB Ltd. raised its price estimate for growers delivering into its noodle-wheat marketing-pools by A$36 a ton as production of the crop in Western Australia was likely to fall ?well short? of demand, the Melbourne-based company said.
-- Palm oil dropped from a 27-month high on the Malaysia Derivatives Exchange as the dollar rallied from a one-week low, reducing the attraction of raw materials as alternative investments.
-- Indonesia, the world?s largest palm-oil producer and third- largest cocoa producer, raised the taxes and base prices for export of the commodities in November due to an increase in prices, a trade ministry official said.
-- India may import as much as 10 million tons of edible oil in the financial year that began April 1, Trade Secretary Rahul Khullar said.
-- ACE Derivatives & Commodity Exchange Ltd. said it will start futures trading in farm and energy products and gold tomorrow.
-- Thailand?s government halted sales of rice from state stockpiles because of concern that floods will damage crops and reduce production of the grain, deputy government spokesman Marut Masayawanit said.
-- Plants? genetic diversity must be conserved to ensure food security, the United Nations? Food and Agriculture Organization said.