WASHINGTON (Reuters) - U.S. farmers say they will plant some of the biggest corn and soybean crops ever this spring, racing to keep pace with unrelenting global demand that's rapidly depleting stockpiles and driving up food costs.
A government survey found corn plantings would be the second-largest since World War Two and soybeans the third highest ever. But traders focused on a companion report that showed unexpectedly small stockpiles, sending corn prices up by 5 percent. Wheat and soybeans surged more than 3 percent.
"We are not going to run out of (corn and soybeans) but we are in a very tight situation," said Joe Glauber, Agriculture Department chief economist, in an Insider interview.
The USDA reports underscored that U.S. farmers are reaching the limits of arable land in the world's biggest crop exporter, with increased corn crowding out soybeans and cotton. Spring wheat sowing, while among the biggest in decades, could yet shrink.
This year's spring planting season in the world's biggest crop exporter is being watched more closely than ever by countries fearful that further increases in already record-high food prices could stoke unrest. Traditionally docile U.S. food prices are forecast to rise a sharp 3.5 percent.
A Reuters analysis of likely plantings and historical yields suggested the corn harvest could be the largest ever, at 13.7 billion bushels, and soybeans the third-largest at 3.3 billion bushels.
Even so, corn inventories at the end of the 2011/12 season would equal a three-week supply. Soybeans would dwindle to scarcely 10 days' cover. Analysts say prices must rise high enough to reduce demand.
"This turns us back to having to ration the corn," said Charlie Sernatinger, analyst at ABN Amro.
Corn for May delivery jumped 30 cents to $6.93-1/4 a bushel, the largest daily rise allowed in Chicago markets. Options trading suggested further gains to more than $7.15, near the post-2008 peak of $7.35 hit on March 4. Soybeans jumped to over $14.18 and wheat recouped part of its 20 percent slump since mid-February.
NEARLY POST-WAR PEAK
Farmers plan to sow 92.2 million acres with corn, the most since 2007 and second-largest since World War Two. That's up 4.5 percent from a year ago, more than the 4.1 percent rise that traders expected.
But it will barely replenish stocks drained by strong ethanol and livestock feed demand at home and ravenous demand abroad, including surprise buying from China. Stocks are falling faster than expected, with inventories as of March 1 at 6.52 billion bushels, about 2.5 percent less than forecast.
Corn usage was at a record high for the three months ending on March 1, said USDA, with 28 percent of the 2010 crop consumed.
Soybeans, which have fallen 5 percent since hitting a post-2008 peak of $14.50 a bushel in February, will be sown on 76.6 million acres, the third-most ever and down 1 percent from last year. But inventories on March 1 were 1.25 billion bushels, 4 percent less than traders predicted.
USDA's estimates are based on a survey of growers during early March. Farmers can change plans before planting ends in May. Wet weather often delays planting, which can prompt farmers to sow soybeans over corn.
Farmers will sow 253.8 million acres to the eight major crops this year, up 3.5 percent from last year and the most since 1998. Analysts say this will require double-cropping on some land -- planting soybeans after reaping wheat in the spring, for instance -- or bringing lower-quality land into production rather leave it fallow or in pasture.
Iowa, the No. 1 corn state, is expected to plant 13.9 million acres of corn, up 4 percent. Illinois, the No. 2 producer, was forecast to plant 12.8 million acres, up 2 percent from 2010. Nebraska, also a premier grower, would plant 9.5 million acres, up 4 percent.
Corn would expand while soybean shrinks -- USDA said Iowa, Kansas, Nebraska and Ohio each will reduce soybean area by 100,000 acres or more.
Wheat plantings were forecast at 58 million acres, up 8 percent from 2010, led by a 10 percent increase in winter wheat.
The Prospective Plantings report overstated corn plantings in 12 of the last 20 years and under-stated soybeans in 13 of 20 years. The margin of error for both crops is 3.5 percent.