UPDATE 5-US slashes soy, corn stocks, markets soar

Wed Jan 12, 2011 3:02pm EST

Related Topics

 * US soy end stocks 140 mln bu, 10 pct below estimate
 * US corn end stocks 745 mln bu, 4 pct below estimate
 * Corn and soybean prices jump to 2-1/2 year highs
 * Agribusiness stocks soar on USDA report
 (Updates with explanation of supply decline in paragraph two)
 By Russell Blinch
 WASHINGTON, Jan 12 (Reuters) - America's stockpiles of corn
and soybeans will be drawn down to uncomfortably thin levels
this year, according to a government report on Wednesday that
sent grain prices soaring and added to concerns over surging
world food prices.
 Dwindling stocks in the world's biggest food exporter --
depleted by strong ethanol demand and a sharp reduction in
estimated corn and soy production last year -- and poor crops
in other major exporting countries are setting up what could be
one of the toughest years for food prices and supplies since
2008.
 The market is drawing parallels with the tight supplies of
that year and is concerned that runaway food prices could again
lead to shortages and unrest in poor countries.
 So far, there has has been nothing like the food riots seen
two years ago.
 The U.S. Department of Agriculture forecast that by the
time next year's crop is ready for harvest in September stocks
of soybeans will be just 140 million bushels, 10 percent below
analyst expectations. Corn stocks will likely stand at 745
million bushels, 4 percent below trade forecasts and the
smallest supply since 1995.
 Both corn and soybeans touched their daily trading limits
and hit 30-month highs on the Chicago Board of Trade after the
surprising report. Soy was up more than 4.6 percent to $14.12 a
bushel while corn was up 4.12 percent at $6.32-1/4 a bushel.
 "These numbers are bullish numbers across the board," said
Rich Nelson, an analyst with the brokerage Allendale Inc. "Most
of the moves were made on production revisions and that should
be a surprise to most of the trade."
 Soaring grains sent livestock prices higher LCc1 as the
rising cost of feeding animals was expected to crimp herd sizes
and push up the cost of meat and dairy products. 
 CORN YIELDS TRIMMED
 The U.S. Agriculture Department said the corn stocks-to-use
ratio -- an important indicator of supply and demand -- was
projected at 5.5 percent, the lowest since 1995-96 when it
dropped to 5 percent. The ratio reflected USDA's lower yield
estimates for last fall's harvest and higher ethanol use
outlook.
 The stocks-to-use ratio for soy was 4.2 percent, the lowest
level since soybeans became a major crop for U.S. farmers, said
Keith Menzie, an oilseeds analyst for the department's World
Agricultural Outlook Board.
 Stocks of U.S. soybeans totaled only 2.28 billion bushels
as of Dec. 1, or 3 percent less than traders had expected,
while the production forecast was 1.3 percent lower than
expected by the market at 3.329 billion bushels.
 "With our strong demand we shrunk our supply of corn and
beans and consequently the market is racing higher to ration
supplies," said Don Roose, analyst with U.S. Commodities.
 <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
  Related graphics:
  US corn stocks-use ratio      r.reuters.com/sec85r
  Soybean end stocks            r.reuters.com/sab85r
  Corn end stocks               r.reuters.com/tab85r
  Wheat end stocks              r.reuters.com/vab85r
  Corn stocks at Dec 1          r.reuters.com/rec85r
  Wheat stocks at Dec 1         r.reuters.com/pec85r
  Soybean stocks at Dec 1       r.reuters.com/qec85r
  Winter wheat seedings         r.reuters.com/wab85r
  Corn production, yield        r.reuters.com/tec85r
  Soybean production, yield     r.reuters.com/vec85r
  Interactive graphic:
  crop stock to use ratio       r.reuters.com/pup95r
  Reuters Insider:
  Return of the Food Crisis? link.reuters.com/tyq75r
  Column:
  Food price story not the same as 2008     [ID:nN11148019]
 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 USDA said said Dec. 1 corn stocks also came in slightly
lower than expected at 10.04 billion bushels, down 8 percent
from a year ago and just below the 10.067 billion bushels on
average expected by traders.
 Wheat inventories at Dec. 1 were closer to expectations at
1.93 billion bushels, up 8 percent from a year ago.
 The USDA boosted wheat exports because of brisk sales to
date and reduced competition from flood-hit Australia.
 It was also a big day for agribusiness companies on U.S.
markets, with the fertilizer maker Potash Corp (POT.TO) (POT.N)
up more than 2.6 percent and Monsanto (MON.N) up 3.5 percent.
Tyson Foods (TSN.N), possibly facing higher feed costs in
producing its meat products, fell more than 1 percent.
 Cargill reported sharply higher earnings on Wednesday,
helped by its fertilizer producer, Mosaic (MOS.N), which was up
over 4 percent on the market.
 BIG WHEAT PLANTINGS
 The USDA released its first estimate of winter wheat
plantings. At 40.99 million acres it represented a 10 percent
increase over last year and reflected strong prices and good
planting conditions.
 Strong world demand led by China and one of the hottest
years on record [ID:n N12197667] combined to diminish crop
inventories globally in 2010. Concern is now mounting that
output will be hurt further by bad weather in big producing
countries such as Australia and Argentina this year.
 The USDA has not yet forecast how many acres U.S. producers
will plant to corn and soybeans this spring. But this year is
off to a bad start in other parts of the world with searing
heat in Argentina and floods in Australia darkening the outlook
for their big harvests.
 USDA cut its forecast of Argentina's soy production by 3
percent from last month and also cut Argentina's corn outlook,
by 6 percent.
 Australia's wheat crop outlook was trimmed by 2 percent
from last month, and exports were forecast to decline 1.5
million tonnes as heavy rain and flooding reduced the quality
of the harvest and further pressured world supplies and
prices.
 However, the USDA increased global 2010/11 wheat ending
stocks slightly. Traders had expected a cut.
 (Additional reporting by Karl Plume in Chicago; editing by
Roberta Rampton and Jim Marshall)


FILED UNDER: