Tight supply outlook jolts U.S. corn

U.S. corn futures jumped on Friday on a tighter-than-expected supply outlook from the U.S. Department of Agriculture, while soybeans stumbled on a bigger-than-expected forecast.

The split reaction came as USDA, in a monthly crop report, kept its forecast for supplies of both crops unchanged from February.

Analysts polled by Reuters had expected the government to increase its estimate for corn inventories 1.7 per cent and cut its estimate for soybean inventories four per cent.

The estimate for corn supplies was steady at 632 million bushels, a 17-year low, and the soybean supply estimate held at a nine-year low of 125 million bushels.

“There’s more concern about the tightness in corn,” said Don Roose, president of U.S. Commodities at West Des Moines, Iowa.

Chicago Board of Trade (CBOT) May corn climbed 1.8 per cent to $7.03-1/2 a bushel, while December corn gained one per cent to $5.47. May soybeans dipped 0.2 per cent to $14.71 a bushel, and November soybeans lost 0.7 per cent to $12.68-1/2 (all figures US$).

The most surprising aspect of the report was a 2.2 per cent increase in the forecast for the amount of U.S. corn that will be used for feed and “residual” purposes, said Alan Brugler, president of Brugler Marketing and Management in Omaha.

The adjustment looked bullish because low-priced wheat was thought to be displacing corn as feed for livestock, he said, noting USDA’s “confidence on the feed use” of corn.

USDA said the 100-million-bushel bump came from a continued expansion in poultry production and a reduction in the projected feed and residual use of sorghum, another livestock feed.

Traders are waiting for USDA to provide a closer look at U.S. grain supplies in a quarterly stocks report on March 28.

Brazil backed up

USDA unexpectedly raised its estimate for global soybean supplies, adding further pressure on soy prices. It kept the estimate for Brazil’s soy crop unchanged, while analysts were looking for a slight decline.

“Beans got the worst end of the deal from the standpoint of South America supplies, the Brazilian production number, and U.S. stocks not being changed,” said Mike Zuzolo, president of Global Commodity Analytics and Consulting in Lafayette, Indiana.

Demand for soybeans has been shifting to the U.S. from Brazil as port delays have slowed the flow of soybeans from South America.

Soybeans from new crops in Brazil and Argentina are urgently needed to replenish tight global supplies after the worst U.S. drought in 50 years reduced last year’s U.S. harvest.

In the near term, the flow of soybeans from South America could slow even further as Brazilian dock workers are planning a 24-hour nationwide strike on March 19, traders said.

Wheat supply expands

USDA raised its forecast for U.S. wheat supplies 3.6 per cent from last month to 716 million bushels due to poor export demand, topping the 1.9 per cent increase analysts were expecting.

CBOT May wheat rose 0.2 per cent to $6.97 a bushel.

— Tom Polansek writes for Reuters from Chicago. Additional reporting for Reuters by Karl Plume and Julie Ingwersen.

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