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Futures surge on USDA reports

03/30/2012 @ 6:49pm

U.S. corn futures rose by the maximum allowed in a day and soybeans hit a fresh six-month high as reports from the federal government renewed concerns about tight supplies of the crops.

The U.S. Department of Agriculture on Friday released two closely watched reports, one detailing how much grain is in domestic storage as of March 1, and the other projecting how many acres farmers will plant this spring of major crops such as corn, soybeans and wheat.

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A lower-than-expected inventory figure for corn caused prices to shoot higher, even though the USDA also said farmers are likely to plant the largest U.S. corn crop in 75 years. The large crop would replenish supplies when it is harvested later this year, but traders focused instead on the inventory figure due to uncertainties including weather that could still change the size of the harvest this year.

Corn for May delivery settled the limit of 40 cents higher, up 6.6%, at $6.44 a bushel at the Chicago Board of Trade.

The USDA's storage report put corn inventories at 6.01 billion bushels, 8% lower than a year ago and below market expectations. The supplies raised fears corn supplies will run low before the fall harvest, particularly as demand remains strong both at home and abroad.

Farmers are responding to the tight supplies, with the USDA forecasting they will sow 95.9 million acres with corn, the largest planting since 1937.

The corn-planting estimate is likely the highest the USDA will give this year as plantings actually occur and the USDA updates its figures, analysts said. The potential for the actual planting number to fall gives corn more potential upside in coming months, said Mike Zuzolo, president of Global Commodity Analytics and Consulting.

For soybeans, the USDA expects soybean plantings to drop 1% to 73.9 million acres this year. Analysts on average had expected a slight increase in acreage.

The forecast led soybeans to continue their rally of recent weeks that has been driven by expectations for greater export demand for U.S. soybeans, since drought in South America has cut the size of soy crops in Brazil and Argentina.

CBOT May soybeans settled up 47 1/2 cents, or 3.5%, at $14.03 a bushel.

Wheat futures also surged as the USDA forecast plantings to be smaller than expected. Traders particularly keyed on a 3% decline in spring wheat planting from a year ago.

CBOT May wheat futures settled up 48 1/4 cents, or 7.9%, at $6.60 3/4 a bushel.

For wheat and corn, the rally brought futures back up into the range where they had traded in recent weeks, before falling amid uncertainty ahead of the USDA reports.

In coming weeks, analysts say futures prices will be driven by weather conditions and changing expectations for crop yield levels.

-By Owen Fletcher, Dow Jones Newswires; 312-750-4120; owen.fletcher@dowjones.com

(END) Dow Jones Newswires

March 30, 2012 16:16 ET (20:16 GMT)

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