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Corn, wheat ride USDA data higher

01/11/2013 @ 3:21pm

Corn and wheat futures prices jumped Friday after U.S. forecasters projected tighter-than-expected domestic supplies of the grains this year.

The U.S. Department of Agriculture said farmers last year harvested slightly more corn than it previously expected amid the nation's worst drought in decades. However, the government said livestock and poultry producers are consuming corn at a higher rate than it had anticipated, which will result in historically tight supplies later this year.

The USDA, in a set of closely watched crop reports, also said wheat supplies will be smaller this year than analysts predicted because of strong demand for wheat for animal feed.

March corn futures settled up 10 cents, or 1.4%, at $7.08 3/4 a bushel at the Chicago Board of Trade, a three-week closing high. CBOT March wheat rose 10 1/4 cents or 1.4% at $7.54 3/4 a bushel, a one-week closing high.




March soybeans settled down 6 1/2 cents, or 0.5%, at $13.73 1/4 a bushel, after the USDA raised its estimate of soybean production last year by more than analysts had projected.

The USDA said corn stockpiles as of Dec. 1 stood at 8.03 billion bushels, lower than the average analyst forecast of 8.21 billion in a Dow Jones Newswires poll.

The government lowered its forecast for corn exports in the crop year that ends Aug. 31, amid what it called "stiff competition" from other exporters, such as Brazil. But due to domestic demand from the meat industry, it projected that corn supplies at the end of the crop year will be just 602 million bushels, down from its forecast last month of 647 million bushels and sharply lower than analyst projections.

Many traders were caught off guard by the USDA's increase in projected animal-feed usage. High feed prices have hurt livestock producer margins in recent months, leading many traders to assume they were cutting back on production.

"The big shocker is feed usage," said Doug Bergman, a trader and vice president at RCM Asset Management, a Chicago brokerage.

The USDA said the higher-than-expected domestic corn consumption is "expected to support continued strong and volatile [corn] prices well into summer."

The USDA's tighter supply estimates for corn make it more important that U.S. farmers plant a big crop this coming spring. Drought conditions that have persisted since last summer in much of the country's heartland could threaten new crops if they don't improve further.

"Tight supplies have stayed," said Larry Glenn, an analyst at Frontier Ag, a commodities brokerage firm in Quinter, Kan. "That means not much room for error" for the next corn crop, he said.

Deferred corn contracts, for September delivery and later, fell on Friday due to expectations for a potentially large U.S. corn crop this year to replenish supplies and ease prices in the fall.

Meanwhile, the USDA on Friday said farmers planted more winter wheat for the new crop year than for the 2012 crop year, although not as much as analysts anticipated.

Farmers planted 41.82 million acres with hard red winter, soft red winter and white winter wheat for 2013 harvest, about 1% more than in the previous crop year. Analysts were generally expecting a 3% bump in winter wheat planting.

The USDA cut its forecast for domestic wheat inventories on May 31, the end of the crop's marketing year, by 5% to 716 million bushels, a sharper decline than analysts had expected.

U.S. farmers produced 3.015 billion bushels of soybeans last year, the USDA said Friday, up from the agency's December estimate of 2.971 billion bushels. The amount of land harvested by farmers and the average yield they got from the plants were both higher than expected, the USDA said.


(Ian Berry contributed to this article.)
-Write to Owen Fletcher at owen.fletcher@dowjones.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones Newswires
January 11, 2013 15:38 ET (20:38 GMT)
DJ U.S. Corn, Wheat Futures Settle Higher on USDA Estimates->copyright


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