GRAINS: Surge on Shrinking US Stocks, Corn Limit Up – By Reuters

Grains Rally on Bullish USDA Data

• Corn prices hit the daily limit, rising by 4.5 percent due to strong demand impacting stocks.
• Soybeans increased by 2.8 percent as a result of reduced stocks and a decline in acreage.
• Wheat also moved higher, gaining 5 percent, despite a bearish USDA forecast.

By Karl Plume

Grain prices surged on Thursday, with corn climbing 4.5 percent as robust demand reduced stock levels, even as farmers prepared to plant their second-largest area since 1944.

Soybean prices reached a seven-week high after the U.S. Agriculture Department reported stocks that were lower than expected, as well as spring planting figures that did not meet projections.

Wheat prices increased by 5 percent, following the upward momentum of corn and soybeans, despite a negative stocks forecast and a larger-than-predicted rise in the USDA’s forecast for spring wheat plantings.

"Despite food inflation and market fluctuations, demand remains strong both in the U.S. and internationally for agricultural commodities," stated Shawn McCambridge, an analyst at Prudential Bache Commodities. "Farmers are responding to market signals. The acreage data highlights an ongoing competition for land as available acreage diminishes."

The price rally on Thursday marked a positive end to what has been the weakest quarter since mid-2010, suggesting that the previous surge in grain prices had peaked amid expectations of abundant U.S. crops.

Chicago Board of Trade May corn futures closed at the daily limit of $6.93-1/4 per bushel, marking the biggest gain in nearly two weeks. Traders noted synthetic trades reaching as high as $7.32 per bushel, the highest in three weeks.

May soybean futures increased by 38-1/4 cents to $14.10-1/4 per bushel—a 2.8 percent increase, representing the largest rise in two weeks—after earlier reaching a seven-week high of $14.32.

May wheat prices rose by 36 cents, or 5 percent, closing at $7.63-1/4 per bushel, the highest price seen in three weeks. This spike was driven in part by technical buying as the contract exceeded its 200-day moving average.

Over the quarter, spot month corn saw a 10.2 percent increase, soybeans gained 1.2 percent, while wheat experienced a decrease of 3.9 percent.

Declining Corn Stocks

Corn stocks are depleting more rapidly than expected, even as prices approach levels not seen since record-setting gains in 2008.

"The major highlight was the USDA’s corn stocks figure, which reflects robust demand and the movement of corn into marketing channels," explained Jerry Gidel, an analyst for North America Risk Management Inc. He noted that the data indicated feed demand has not dropped, contrary to some expectations, and suggested that ethanol production remains strong.

The USDA had already projected end-of-marketing-year corn stocks at their lowest level in 15 years, but the quarterly stocks estimate hinted at an even tighter supply.

"The market is now scrutinizing whether new-crop stocks will only match this year’s forecast instead of exceeding it, leading some to suggest that new-crop futures might need to be set at $7 per bushel," said Rich Nelson, director of research at Allendale Inc.

According to the USDA, March 1 corn stocks were at 6.523 billion bushels, falling short of the range of trade estimates.

Bullish Stocks Outweigh Acreage Concerns

Investors were more focused on the bullish estimates for March 1 corn and soybean stocks rather than the prospective planting forecasts, which aligned with pre-report expectations.

Farmers may adjust their crop allocations in the coming weeks, with changes expected to be reflected in the USDA’s acreage report on June 30.

The USDA’s March 1 soybean stocks estimate was 1.249 billion bushels, lower than trade estimates; however, the rise in oilseed prices on Thursday was less pronounced than corn’s, which had been declining before the report amid anticipations of an increase in corn acreage versus soy.

The USDA’s highly anticipated prospective plantings report indicated corn seedings at 92.178 million acres and soybean plantings at 76.609 million acres, both figures falling within the range of pre-report estimates.