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Specs push corn higher

12/11/2013 @ 9:22pm

Corn futures rose to the highest level in almost a month Wednesday after investors who had bet prices would fall bought back their contracts.

Rising production of corn ethanol and a lowered forecast for domestic stockpiles in a U.S. Department of Agriculture report on Tuesday helped sentiment.

Speculative investors who were net-short 118,814 contracts as of Dec. 3, according to the Commodity Futures Trading Commission, may be buying to close out their positions, analysts said. Ethanol production averaged 944,000 barrels a day in the week that ended on Dec. 6, the highest 23 months, according to data from the U.S. Department of Energy.

Corn inventories will total 1.792 billion bushels at the end of the marketing year on Aug. 31, the USDA estimated in it month supply and demand report. That's below the 1.887 billion bushels forecast by the government in November. The stockpiles estimate declined as the government raised its outlook for exports and ethanol use.

"The principal feature today was the ethanol number being the highest since January of 2012," said Rich Feltes, director of research at brokerage R.J. O'Brien in Chicago. "The USDA took carryover down a little bit [in Tuesday's report], but it's still very ample."

Corn futures for December delivery on the Chicago Board of Trade rose 3 3/4 cents, or 0.9%, to $4.31 1/4 a bushel, the highest closing price for a front-month contract since Nov. 12.

Soybean futures for January delivery rose 5 3/4 cents, or 0.4%, to $13.44 a bushel in Chicago trading.

The USDA lowered its forecast for soybean inventories by 12% to 150 million bushels. Domestic processing of the oilseeds and exports to overseas buyers are expected to top last month's expectations, reducing the amount of soybeans that will be in storage on Aug. 31, according to the government.

Tight stockpiles will keep prices buoyed until February or March, when growers in Brazil, the world's largest exporter of the oilseeds, and Argentina begin harvesting, Mr. Feltes said. The USDA has forecast Brazil's soybean crop at 88 million metric tons, the biggest ever. Because corn prices have fallen about 39% this year, U.S. growers may opt to increase the number of soybeans they are planting as well, he said.

"Soybeans are short-term positive but long-term negative," Mr. Feltes said. "At the end of the day the record soy crop in Brazil and higher soybean planting here will pressure prices."

Wheat futures for December delivery ended Wednesday's session higher, rising 3/4 cent, or 0.1%, to $6.30 1/4 a bushel on the CBOT, after earlier falling to the lowest intraday price in almost four months. The price dropped earlier after the USDA unexpectedly raised its outlook for domestic stockpiles as it expects the U.S. to import more of the grain from Canada.

Write to Tony C. Dreibus at tony.dreibus@wsj.com

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