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

Grains Surge on Strong Demand and USDA Data

• Corn prices reach their limit, climbing 4.5% on robust USDA data.
• Soybean prices increase by 3% due to lower stock levels and a decline in acreage.
• Wheat prices rise in tandem with corn and soybeans, despite bearish USDA data.

CHICAGO, March 31 – Grains experienced a significant upswing on Thursday, with corn prices rising by 4.5% as strong demand contributed to decreasing stocks, even as farmers prepared to plant the second-largest area since 1944.

Soybean prices soared to a seven-week high following a report from the U.S. Agriculture Department indicating lower-than-expected stocks and spring seedings. Meanwhile, wheat also saw a 3.5% increase in light trading, propelled by the gains in corn and soybeans, despite a less favorable stocks forecast and an unexpected rise in the USDA’s spring wheat seedings estimate.

"The primary focus was the USDA’s corn stocks figure, reflecting demand and the movement of corn into the marketing channel," noted Jerry Gidel, an analyst with North America Risk Management Inc. "This indicates feed demand has not decreased as anticipated and that ethanol production remains strong."

Thursday’s rally marked a positive conclusion to what had been the weakest quarter since mid-2010, as it appeared that grain prices had peaked amid expectations of large U.S. crops.

As of 11:52 a.m. CDT (1652 GMT), Chicago Board of Trade May corn futures hit the daily limit of a 30-cent increase, reaching $6.93-1/4 per bushel. Traders indicated that the contract was trading synthetically through options as high as $7.26 per bushel, representing a three-week high.

May soybean futures rose by 41 cents to $14.13 per bushel, achieving a 3 percent gain—the largest increase in two weeks—after peaking earlier at $14.32.

May wheat futures surged by 36-1/4 cents, or 5%, reaching a three-week high of $7.63-1/2 per bushel, marking the largest percentage rise in two weeks.

Despite prices nearing the heights of 2008’s record-setting rallies, the stocks for corn and soybeans are dwindling faster than anticipated.

"We haven’t started rationing demand yet," said Rich Nelson, director of research at Allendale Inc. "Extremely tight supplies are expected to tighten further."

Analysts are now speculating whether new-crop corn stocks, initially projected to be slightly higher than this year, may end up being equivalent to this year’s levels, suggesting that new-crop futures may need to be priced at $7 per bushel.

The USDA has already forecasted the end-of-marketing-year corn stocks will be at their lowest level in 15 years, and Thursday’s quarterly stocks estimate hinted at an even tighter supply situation. The USDA reported March 1 corn stocks at 6.523 billion bushels, falling below trade estimates.

While corn and wheat were set to finish lower for March, soybeans appeared poised for a rebound from a decline in February, marking a trend of six gains in the last seven months.

Market Dynamics: Bullish Stocks vs. Acreage

Investors took a closer look at the USDA’s bullish March 1 corn and soybean stocks estimates rather than focusing on the prospective planting forecasts, which remained within expected ranges. Farmers may still revise their planting areas in the coming weeks, and such adjustments will be reflected in the USDA’s acreage report on June 30.

The USDA reported March 1 soybean stocks at 1.249 billion bushels, also below the anticipated range. The prospective plantings report indicated corn seedings at 92.178 million acres and soybean plantings at 76.609 million acres, both within the pre-report estimate ranges.