Corn futures hit $5 after US curbs supply hopes

Corn futures rebounded to $5 a bushel for the first time since September after the US eroded ideas of ample domestic supplies of the grain, saying that inventories are a little lower than thought and that sowings will fall significantly this year.

The US Department of Agriculture, in a much-anticipated report on domestic grain stocks as of March 1, said that inventories of corn had risen by 30% year on year to 7.01bn bushels (178m tonnes).

However, the figure was more than 90m bushels (2.3m tonnes) below market expectations, with traders expecting inventories to have shown a bigger rise after last year's record harvest.

And the USDA, in a separate closely-watched report, curtailed expectations of corn harvest prospects for this year by estimating sowings at a four-year low of 91.7m acres, down some 3.7m acres year on year.

The estimate was more than 1m acres short of the figure that investors had expected.

'Bought back some demand'

The stocks figure implied use of 3.45bn bushels (88m tonnes) of US corn during the three months to March 1, up from 2.63bn bushels a year before, when consumption was squeezed by a dearth of availability following the drought-hit 2012 harvest.

USDA US corn data and (difference from market forecast)

March 1 stocks: 7.006bn bushels, (-93m bushels)

2014 sowings: 91.691m acres, (-1.057m acres)

2013 sowings were 95.365m acres

The forecast at the USDA's Outlook forum was 92.0m acres

"Lower prices have bought back some demand," said Steve Kahler, chief operating officer at Teucrium Trading, the New York-based issuer of commodity exchange-traded products.

"Livestock margins are good, ethanol production margins are good, exports have been good.

"There are unlikely to be many doubts, questions over these data," he said.

Stocks reports are often the subject of some controversy among analysts, revealing figures which are, on the face of it, difficult to explain.

Price impact

The impact on futures was send Chicago's benchmark May contract, which had tumbled 3.3% to $4.75 3/4 a bushel ahead of the report for fear of a large stocks number, into a sharp recovery.

USDA US soybean data and (difference from market forecast)

March 1 stocks: 992m bushels, (+3m bushels)

2014 sowings: 81.493m acres, (+475,000 acres)

2013 sowings were 76.533m acres

The forecast at the USDA's Outlook forum was 79.5m acres

The contract soared to a six-month high of $5.00 3/4 a bushel at one point before easing back to $4.99 1/4 a bushel as of 12:10 local time (18:10 UK time) a gain of 1.5% on the day.

The new crop December contract was up 1.9% at $4.96 1/2 a bushel, spurred by the lower-than-expected sowings figure, closing the discount to the May contract.

Record soybean plantings

Price moves in other crops were more mixed.

In soybeans, the old-crop May contract found support from corn to gain 1.5% to $14.57 1/2 a bushel. The USDA estimate for US inventories as of the start of this month was, at 992m bushels, very close to market forecasts.

USDA US wheat data and (difference from market forecast)

March 1 stocks: 1.056bn bushels, (+14m bushels)

2014 sowings: 55.815m acres, (-462,000 acres)

2013 sowings were 56.156m acres

The forecast at the USDA's Outlook forum was 55.5m acres

But the new crop November contract dropped 0.6% to $11.83 1/4 a bushel, undermined by data signalling that the bigger-than-expected drop in corn sowings was being fuelled by a switch to soybeans, a major competitor in farmers' spring planting programmes.

US soybean sowings will hit a record 81.5m acres, the USDA said, a figure some 400,000 acres bigger than investors had expected.

Mixed for wheat

For wheat, the inventory data were a little bearish, in showing inventories as of March 1 at 1.06bn bushels, some 14m bushels more than investors had expected.

However, for sowings, the estimate for plantings of 55.8m acres was roughly 460,000 acres below market forecasts, reflecting a lower-than-expected figure for spring plantings of 11.3m acres.

Investors had expected a spring sowings estimate of 12.27m acres.

The estimate for winter wheat sowings was nudged higher to 42.0m acres, reflecting a slightly higher estimate for plantings of hard red winter wheat.

May wheat, which had fallen ahead of the data on hopes of rain for southern Plains crops, stood 0.8% lower at $6.90 a bushel in Chicago, with Kansas City-traded hard red winter wheat down 0.89% at $7.57 1/4 a bushel.

Cotton data

In cotton, the USDA pegged sowings at 11.1m acres including pima cotton, a rise of 107,000 acres, or 6.7%.

The figure was below the 11.5m acres the USDA outlined last month, at its Outlook conference, and below the expectations of many analysts, who had forecast a bigger boost the popularity of the fibre from relatively high prices.

Nonetheless, New York cotton for May stood 0.2% lower at 93.57 cents a pound in late deals, with the new crop December contract down 0.1% at 79.82 cents a pound.

Evening markets: corn regains lead in grains, after US data
One number key to negotiating big day for USDA crop reports
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