UPDATE 6-Corn prices dive on U.S. acreage, stocks shocker

Thu Jun 30, 2011 6:26pm EDT

Related Topics

 * Corn stocks 11 pct bigger than analysts expected
 * Corn sowing 2 pct above, leads to "historic" price dive
 * "American producers stepped up"-Vilsack
 * USDA to revisit plantings for four northern states
 (Reledes. Adds skeptics point of view.)
 By Charles Abbott and Christine Stebbins
 WASHINGTON/CHICAGO, June 30 (Reuters) - U.S. corn
stockpiles are far larger than thought and a bumper harvest is
on the way, the government said, in reports on Thursday that
alleviated worries of a global food shortage and sent corn
prices tumbling by record amounts.
 Corn prices went down by a one-two punch from the
Agriculture Department's annual acreage and quarterly grain
stocks reports, which showed ample supplies despite months of
fretting over dwindling stockpiles that drove corn prices to
record highs in recent weeks.
 "American producers stepped up," U.S. Agriculture Secretary
Tom Vilsack told Reuters Insider, noting that technology has
boosted yields and mitigated concerns about tight world grain
 Sky-high prices curbed demand, leaving June 1 stockpiles 11
percent larger than traders had predicted.
 The news could help ease price shocks that have rippled
through to the bottom lines of U.S. food makers and contributed
to calls to limit commodity market speculation, which many
blame for driving prices higher and fanning global inflation.
 General Mills (GIS.N) and other companies that use U.S.
crops to make food have blamed high commodity prices for
inflating costs and hurting earnings. [ID:nN1E75S0TF]
 Food costs have spiraled globally and U.S. corn prices had
risen by as much as 25 percent this year, made worse by spring
flooding in the Midwest, stirring concerns over shortages and
causing some livestock farmers to switch to other grains.
 The harvest, however, is two months away. So there is still
uncertainty about the toll of rain and flooding on crops, and
grain markets remain volatile. Some traders said, USDA was too
optimistic -- it has North Dakota plantings down by 1 percent,
for example. State officials say 25 percent may go idle.
 "I don't know if this piece of news is enough to completely
take away the cost pressures," said Morningstar analyst Erin
 Corn, soy plantings           r.reuters.com/pep42s
 Wheat plantings               r.reuters.com/rup42s
 Corn stocks                   r.reuters.com/qys42s
 Soy stocks                    r.reuters.com/pys42s
 Wheat stocks                  r.reuters.com/nys42s
 INSTANT VIEW                              [ID:nN1E75T09R]
 INSIDER: Vilsack interview link.reuters.com/pet42s
 FACTBOX-Roller-coaster ride for corn      [ID:nN1E75T1BV]
 FACTBOX-Third of wheat in hard-hit area   [ID:nN1E75T195]
 FACTBOX-US plantings of 8 major crops     [ID:nN1E75T0FK]
 TAKE A LOOK-Rising world food prices      [ID:nFOODPOLIC]
 The report caused havoc in trading pits at the Chicago
Board of Trade, where corn for July delivery CN1 settled 10
percent lower at $6.29 a bushel -- a record decline by value
and percentage -- and deferred contracts locked down the limit
of 30 cents per bushel. [GRA/]
 The July contract is in its delivery period and trading
without limits.
 With futures halted, traders rushed to the options pit,
where panicked trading indicated futures prices could plunge
again on Friday. [ID:nN1E75T13R]
 "There is nothing like this on the chart," said Rich
Feltes, a veteran grain analyst with R.J. O'Brien, who has
watched the market rise and fall for more than 35 years.
 "This is historic," he said.
 Before the report, corn prices had already slid 20 percent
from their peak near $8 per bushel reached three weeks ago.
 There was added drama for algorithmic traders.
 A technical equipment glitch in USDA's guarded lock-up room
led to the release of information by Reuters and other wire
services two minutes earlier than scheduled, throwing off some
computer programs. [ID:nN1E75T0VV]
 "This is scandalous. Paris was the only market open when
the USDA (data) was released. We had no warning that the report
would be released earlier than scheduled and we want to know
why," said a dealer at a leading broker in Euronext futures.
 In London, the International Grains Council raised its
forecast for world corn and wheat crops in the year ahead.
 Red-hot demand from corn exporters, livestock feeders and
processors are forecast to consume every bushel grown in 2010
and eat into reserves, but the higher stocks number was a sign
that demand has been rationed.
 U.S. lawmakers are also weighing ending subsidies worth $6
billion a year to ethanol makers, a move that could affect
demand since nearly 40 percent of the U.S. corn crop goes to
ethanol production. [ID:nLDE75S0ES]
 The USDA said the corn stockpile was 3.67 billion bushels
on June 1, and it pegged plantings at 92.28 million acres. With
normal weather and yields, a record-large crop could be
The USDA said, it will resurvey farmers in four northern
Plains states that normally produce a third of the U.S. wheat
crop. It includes North Dakota, No 1 in wheat last year.
 A large percentage of those states had not yet planted
crops as of early June, when the USDA conducted its acreage
survey. [ID:nWNA2566]
 July wheat WN1 was down 9 percent at $5.84-3/4 a bushel,
posting its biggest percentage loss in more than two years, in
sympathy with the losses in corn. Wheat stocks were 4 percent
larger than traders expected and plantings were down
 The USDA report was mildly supportive for soybeans, with
plantings 2 percent smaller than traders had expected. July
soybeans SN1 were down 2 percent at $13.06-1/4.
 The soybean crop would be the third-largest on record, but
supplies are still expected to run tight.
 (Writing by Roberta Rampton; Additional reporting by
Christopher Doering and Emily Stephenson in Washington; Marie
Maitre in Paris; Mark Weinraub, Sam Nelson and Julie Ingwersen
in Chicago; and Martinne Geller in New York; editing by Jim
Marshall, Alden Bentley and Carole Vaporean)

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