Corn prices soared after the US stunned investors by cutting
its estimate domestic supplies - contrasting with a plunge in wheat prices to a
two-year low after inventories were raised above expectations.
Corn futures for March soared 5% at one stage in Chicago,
after the US Department of Agriculture weakened ideas of a domestic oversupply
of the grain by cutting by 160m bushels, to 1.63bn bushels, its estimate for
domestic stocks as of the end of 2013-14.
The downgrade surprised traders, who had expected an upgrade
in the stocks estimate, and had bet heavily in the run-up to the report on the
USDA raising its forecast for last year's domestic harvest.
Closing crop prices
Chicago corn, March: $4.32 ¾ a bushel, +5.0%
Chicago soybeans, March: 13.03 ¾ a bushel, +0.6%
Kansas wheat, March: $6.26 a bushel, -2.0%
Paris wheat, March: E194.75 a tonne, -2.3%
Chicago wheat, March: $5.69 a bushel, -2.6%
In fact, the production estimate was downgraded, by 64m
bushels to – still record - 13.925bn bushels, reflecting a cut to the yield
estimate, which contrasted with widespread market talk of better-than-expected
The USDA also raised its estimate for consumption of the
grain, after a quarterly stocks round-up showed less corn in US stores as of the
start of last month than investors had expected.
Wasde 2013-14 corn data, change on last and on (market forecast)
US yield: 158.5 bushels per acre, -1.6 bpa, (-2.7 bpa)
US production: 13.925bn bushels, -64m bushels, (-141m bushels)
US carry-out stocks: 1.631bn bushels, -161m bushels, (-230m bushels)
US stocks, December 1: 10.426bn bushels, N/A, (-364m bushels)
World carry-out stocks: 160.23m tonnes, -2.23m tonnes, (-2.97m tonnes)
"Projected corn use for 2013-14 is raised, with feed and
residual use projected up 100m bushels based on September-November disappearance
as indicated by the December 1 stocks estimate," the USDA said in its monthly
The estimate for the use of the grain in making ethanol was
also upgraded, by 50m bushels, "reflecting continued strong weekly ethanol production,
a reduction in expected sorghum use for ethanol, and higher forecast 2014
gasoline consumption in the latest [official] projections".
The downgraded end-stocks figure still represents a near-doubling
from the weak levels left after the drought-hit 2012-13.
However, the stocks-to-use ratio, an important pricing
metric, implied by the latest data was, at 12.4%, 1.3 points down on that shown
by last month's estimates, and a below-average figure.
Corn displaces wheat
However, wheat prices plunged by more than 4% at one point
after the USDA indicated that domestic, and world, supplies of the grain would
be far larger at the end of the season than had been thought.
Wasde 2013-14 wheat data, change on last and on (market forecast)
US carry-out stocks: 608m bushels, +33m bushels, (+51m bushels)
US stocks, December 1: 1.463bn bushels, N/A, (+63m bushels)
US winter wheat seedings: 41.892m acres, N/A, (-1.609m acres)
World carry-out stocks: 185.4m tonnes, +2.62m tonnes, (+2.83m tonnes)
The extra use of corn for livestock feeding in the US
appeared to have come in part at the expense of wheat, whose domestic stocks as
of December 1 were 60m bushels above expectations.
The jump in corn's discount to wheat to well over $2.00 a bushel later in 2013, reflecting ideas of huge corn supplies, has offered users a financial incentive to switch.
Indeed, the Wasde cut by 60m bushels the forecast for
domestic wheat feeding over 2013-14, leading to an upgrade in the estimate for
wheat inventories left at the close of the season.
The forecast for world stocks was raised, reflecting also
upgrades to Chinese and Russia harvests, which more than offset a downgrade to
the drought-hit Argentine crop.
"Global wheat stocks are projected 2.6m tonnes higher,
mostly on increases for China and the US," the USDA said.