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Corn surges on USDA supply data

03/08/2013 @ 3:19pm

U.S. corn futures rose 1.9% Friday after federal forecasters projected tighter-than-expected domestic supplies of the grain this summer, citing strong demand for corn in animal feed.

Thinly-traded corn futures for March delivery settled up 13 3/4 cents, or 1.9%, at $7.25 1/4 a bushel at the Chicago Board of Trade. May corn rose 12 1/4 cents, or 1.8%, to $7.03 1/2 a bushel.

The U.S. Department of Agriculture, in a monthly crop report, left unchanged its forecast for U.S. corn stockpiles as of Aug. 31, the end of the marketing year, to total 632 million bushels. That would mark the tightest levels for that time of year in 17 years, due largely to last year's severe U.S. drought, which withered the nation's corn crop and led to record corn prices last summer.

Analysts surveyed by Dow Jones Newswires on average had expected the USDA to raise its supply forecast to 649 million bushels.




The USDA lowered its forecast for U.S. corn exports for the year through Aug. 31, citing the slow pace of exports recently and stronger-than-expected competition from South America, where farmers are expected to produce large crops this year.

But the USDA said those declines will be offset by increased use of corn as animal feed, citing growth in poultry production. The USDA raised its forecast for corn usage in animal feed this marketing year by 100 million bushels, or 2%, to 4.55 billion bushels.

"It was surprising that they raised the feed usage number up as much as they did," said Chad Henderson, president of brokerage Prime Ag Consultants in Brookfield, Wisc. Some analysts had expected the USDA to be conservative about changing the feed number, since another USDA report due late this month will give a clearer picture of how strong demand has been from the meat industry.

Wheat futures ended the day mixed. Prices were lifted by the gains in corn, since wheat can substitute for corn in animal feed, but gains were limited by higher-than-expected wheat supply forecasts in the USDA report.

The USDA forecast that U.S. wheat supplies on May 31, the end of the wheat crop year, will total 716 million bushels, up 4% from its February forecast of 691 million bushels and slightly higher than most analysts were expecting.

The USDA lowered its forecast for wheat exports in the current crop year by 25 million bushels. Wheat exports are being hampered by stronger-than-expected foreign competition and plentiful supplies around the world, the USDA said. Ukraine and other European countries are exporting more wheat than expected and those extra sales are taking away business from U.S. exporters, the government said.

Thinly-traded CBOT March wheat rose 3 1/4 cents, or 0.5%, to $6.90 a bushel. Most-active CBOT May wheat rose 1 1/2 cents, or 0.2%, to $6.97 a bushel.

KCBT May wheat fell 1/4 cent, or 0.03%, to $7.34 1/4 a bushel. MGEX May wheat fell 3 1/2 cents, or 0.4%, to $7.92 a bushel.

Soybean futures mostly declined, as the USDA left unchanged its forecast for domestic soybean stocks as of Aug. 31 to total 125 million bushels. Analysts on average had expected a cut to 122 million bushels.

Thinly-traded soybean futures for March delivery settled up 5 cents, or 0.3%, to $15.08 1/2 a bushel. The nearest-term contract often moves in its own direction as it approaches expiration--which is next Thursday for the March contract--since many market participants scramble to exit positions to avoid delivering or receiving physical commodities against the contract.

Other soybean futures all fell. Most-active May soybeans fell 2 1/2 cents, or 0.2%, to $14.71 a bushel.

Traders were disappointed the USDA didn't raise its estimate for U.S. soybean exports, said John Kleist, a senior analyst with brokerage Ebottrading.com in Lakemoor, Ill. "The report lacked any bullish surprises for soybeans and was definitely not enough to fatten up a bull market," he said.

For both the U.S. corn and soybean markets, expectations that South American farmers will harvest huge crops in the next few months are putting pressure on futures prices.

The government kept unchanged its forecast for soybean production in Brazil, which is expected this year to surpass the U.S. as the leading global producer. The government projected Brazil's crop, which is being harvested, at 83.5 million tons.

The USDA kept unchanged its outlook for Brazil corn production of 72.5 million tons.

The USDA trimmed its soybean production forecast for Argentina, the world's No. 3 producer, to 51.5 million tons, down 1.5 million from its estimate last month. "Despite widespread rains in recent weeks, the extended dry period during planting and early crop development limited plantings and reduced yield prospects," the USDA said of Argentina's crop.

The USDA slightly lowered its forecast for Argentina's corn production, to 26.5 million tons, from 27 million last month.


-Andrew Johnson Jr. contributed to this article.
Write to Owen Fletcher at owen.fletcher@dowjones.com and Bill Tomson at bill.tomson@dowjones.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
March 08, 2013 15:53 ET (20:53 GMT)
DJ UPDATE: U.S. Corn Rises On Below-View USDA Supply Forecast->copyright


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