USDA’s low stock prediction pushes corn prices up
WASHINGTON (Reuters) — U.S. corn stocks were below expectations in December and 2013/14 carryout will be smaller than expected, the U.S. Department of Agriculture said on Friday, causing corn futures prices to jump as much as 5 percent.
The USDA forecast 1.631 billion bushels of corn will remain on hand when the new U.S. crop is ready for harvest by late summer, roughly double the drought-affected level of a year ago but down from 1.792 billion projected in December.
The corn stocks-to-use ratio for 2013/14 tightened to 12.4 percent from 13.7 percent forecast a month ago, suggesting corn was underpriced ahead of the report. That caught many traders leaning the wrong way after the market set contract lows just one day earlier.
“The big buffer, the big cushion that we had is not as big as we had previously thought,” said Don Roose, analyst at U.S. Commodities.
Chicago corn futures closed up almost 5 percent, advancing 2 percent on the week. Soybeans pared gains to rise about 0.6 percent and wheat was down almost 3 percent at new contract lows as traders focused on rising U.S. and world stockpiles.
“No doubt about it, the numbers were a shocker on the corn, they were bearish on the wheat, but I’m not sure they were 20 cents bearish,” said Charlie Sernatinger, analyst at ED&F Man Capital.
USDA also showed that recent falling prices caused farmers to turn away from wheat plantings in the U.S. Midwest.
Total winter wheat seeded area for 2014 was down 3 percent from a year ago at 41.9 million acres, with seedings of hard red winter wheat up and soft red winter wheat down sharply.
China has raised the ire of U.S. exporters by rejecting many cargoes of U.S. corn. On Friday, USDA raised China’s 2013/14 corn crop by 6 million tonnes to 217 million, and knocked 2 million tonnes off projected imports to 5 million.
USDA’s battery of reports carried few surprises for soybeans, where the bottom line — projected 2013/14 U.S. ending stocks — was unchanged, but Brazil’s crop was raised again.
Quarterly corn stocks are often one of the most market moving data points from USDA, although Friday’s figure was not as much of an outlier as some.
As of Dec. 1, after the first quarter of the marketing year, the United States had 10.426 billion bushels of corn on hand, below market expectations averaging 10.790 billion but within the range of guesses.
USDA said the figure suggests corn usage in the Sep-Nov quarter of 4.32 billion bushels, up 15.5 percent on the year, as sharply lower prices drew out export and feed demand.
In its first crop forecasts in two months, USDA pegged the 2013 U.S. corn crop at 13.925 billion bushels, still a record high but below the average trade guess of 14.066 billion bushels. That confounded the corn market’s recent expectation that big crops, generally, only get bigger.
Corn yields of 158.8 bushels per acre were down from 160.4 estimated in November and also lower than the trade forecast.
“The whisper going in here was the USDA could come up with a 163-164 (bushel per acre corn yield). The fact that it went down was particularly surprising to a lot of the traders ... you definitely caught the market leaning the wrong way,” said Jim Gerlach of A/C Trading.
Lance Honig, chief of the crops branch for USDA’s National Agricultural Statistics Service, said crop scouts didn’t pick up common themes to explain the small drop in yields.
“It just turned out those yields were just a little bit lower than what they had expected,” Honig said.
Soybean production at a record high 3.289 billion bushels, was up 1 percent from November but close to the average guess of 3.279 billion. Yields were left unchanged from November at 43.3 bushels per acre but harvested acreage was higher.
As debate rages about the fate of the ethanol industry given a possible cut to the Renewable Fuels Standard mandate for 2014, USDA raised its forecast of corn-for-ethanol usage by 50 million bushels, to 5 billion bushels, reflecting continued strong weekly production.
Area seeded to soft red winter wheat, the variety traded in Chicago, fell 16 percent on the year to 8.44 million acres, with decreases seen in most states and especially in Arkansas and Mississippi, USDA said.
By contrast, seedings of hard red winter wheat rose 2 percent to 30.1 million acres.
Large decreases in HRW wheat acreage were logged in Kansas, Oklahoma and South Dakota, while North Dakota growers seeded a record high area.