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Corn soars; more gains expected Monday

10/08/2010 @ 5:27pm

U.S. corn futures ended sharply higher Friday on a stunningly bullish government report, which traders said will continue to drive sharp gains on Monday.

Chicago Board of Trade December corn ended up 30 cents, or 6%, to $5.28 1/4 per bushel and March corn closed up 30 cents to $5.37 1/2.

The rally was sparked by the U.S. Department of Agriculture's supply-and-demand report, which cut the projected 2010 yield 4% to 155.8 bushels per acre. The report estimated stocks as a percentage of usage next year would dip to its lowest level in 15 years.

"This is likely to be met with a bullish response from the market which will likely drag the complex higher today and through the coming weeks," Rabobank said in a report.

In the short term, the market has to ration demand to fend off a supply crisis, analysts said. In the longer term, higher prices are needed to encourage more planted acreage in 2011, analysts said. That will support corn, soybeans and wheat.

Traders said that in the short term, prices are likely to soar Monday, as the December contract was trading synthetically another 40 cents above the trading limit based on options trade. Monday's trading limit will be an expanded 45 cents.

Several analysts issued forecasts following the report calling for prices to climb to $6 per bushel or higher. The ending-stocks estimate underscored "the need for prices to move to $6.00/bu to ration demand," Morgan Stanley analyst Hussein Allidina said in a report.

The report reversed bearish sentiment that had emerged following the USDA's surprising 20% increase in 2009-10 ending stocks issued Sept. 30. A trader said that many market participants were angered by the government's swing in supply estimates. Many traders holding long positions were "washed" out of the market, he said.

CBOT oats futures ended limit up, in unison with corn, wheat and soybeans. December oats climbed 20 cents, or 5.7%, to $3.69 1/4 per bushel and March oats ended up 20 cents to $3.79.

Ethanol futures soared on the bullish USDA corn report. November ethanol ended up $0.196, or 9.9%, to $2.184 per gallon and December ethanol closed up $0.180 to $2.120.

-By Ian Berry, Dow Jones Newswires; 312-341-5778; ian.berry@dowjones.com
(END) Dow Jones Newswires
October 08, 2010 15:49 ET (19:49 GMT)
Copyright (c) 2010 Dow Jones & Company, Inc.

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