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Corn stocks at 16-year low?

Updated: 06/27/2013 @ 9:40am

CHICAGO--The U.S. Department of Agriculture is expected Friday to report the lowest domestic corn stockpiles in 16 years and to cut projected corn plantings, fueling worries about tight supplies.

Analysts also expect the USDA to forecast record soybean plantings this year, although current supplies of the oilseed also remain tight.

Friday's reports on grain stockpiles and planting estimates are among the most keenly awaited each year, and they can drive large swings in futures prices if the survey results diverge sharply from market estimates. The USDA's quarterly stocks reports, in particular, are known for causing sharp price moves.

The USDA's most recent quarterly report on grain stockpiles, released March 28, estimated that corn supplies were well above the level expected by analysts, triggering a 13% decline in corn futures over two days, the biggest two-day decline in corn prices since at least 1959.

Traders are bracing for the possibility of another round of volatile trading Friday, after the USDA releases its reports at noon EDT.

"The trade and [the USDA] have not gotten together here in the last few years on any of these stocks" forecasts, said Sid Love, analyst with Kropf & Love Consulting in Overland Park, Kan. "Recently on the stocks figures, you're either going to be limit-up or limit-down" in the futures market, he said, referring to price swings that reach exchange-imposed daily limits.

Analysts on average expect the USDA to report that domestic corn stockpiles on June 1 totaled 2.856 billion bushels, according to a Dow Jones Newswires poll of analysts. That would be the lowest level for that date since 1997. Estimates by 16 analysts ranged from 2.761 billion to 3 billion bushels.

Corn supplies have been tight since a historic drought withered crops across the Midwest last year, shrinking the nation's harvest and leading corn futures to soar to record prices last summer.

High corn prices have helped ease demand for scarce supplies of the grain, and export demand for U.S. corn has been weak for months. But corn demand from the ethanol sector has been robust recently, helping keep cash markets for the grain strong across the Midwest.

Analysts continue to expect a large harvest this fall to replenish corn supplies and weigh on prices, as long as weather conditions this summer remain moderate.

But expectations for the size of the harvest have decreased because rainy spring weather prevented some farmers from sowing their fields with corn. Analysts on average expect the USDA to estimate this year's corn plantings at 95.34 million acres, down 2% from its March forecast of 97.28 million acres.

Many farmers who were able to plant corn were delayed, sparking concerns about a later harvest as well. If more of the corn crop is harvested at a later date than usual, the stress on tight corn supplies during the late summer will rise. Late planting also reduces yield expectations.

The planting delays for corn could, however, lead to higher planted acreage of soybeans, as some farmers who were unable to plant corn are likely to have switched to the oilseed instead.

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