(Reuters) – Chicago corn rose to its highest in almost three weeks on Monday, adding to a 5 percent jump on Friday when the U.S. government wrongfooted the market by revising down the country’s harvest and projecting lower stocks than expected.
Wheat climbed about 1 percent as the first purchase of U.S. wheat this season by Egypt’s state buyer helped Chicago futures rebound from a three-and-half year low hit on Friday following the U.S Department of Agriculture’s crop estimates.
Chicago Board of Trade March corn was up 0.4 percent to $4.34-1/2 a bushel by 1203 GMT, just below the session peak of $4.35-1/2, the contract’s highest since Dec. 24.
“Corn was under so much pressure before the report that it resulted in a large short position in the market, but the USDA has surprised everyone,” said Vanessa Tan, investment analyst at Phillip Futures in Singapore.
The USDA pegged 2013/14 U.S. corn production at 13.925 billion bushels, still a record but below its previous estimate and the consensus of analyst estimates, as it cut average yield rather than increasing it like the trade had anticipated.
The USDA’s projection of U.S. ending stocks also came in below expectations, reducing the widely tracked stocks-to-use ratio to a lower-than-expected level.
“With the 13/14 production debate now largely settled and stocks looking tighter than many had anticipated, all eyes now turn to the prospects for U.S. demand through the balance of the season,” Morgan Stanley analysts said in a note.
EGYPT BOOKS U.S. WHEAT
Wheat slid almost 3 percent on Friday on larger-than-expected USDA estimates of U.S. and global stocks, partly reflecting a shift in animal-feed demand towards corn.
The pullback in prices drew Egypt, the world’s biggest importer, into the market for a snap tender on Saturday that brought a sale of soft red winter wheat from the United States for shipment in Feb. 11-20.
This first purchase of U.S. wheat in 2013/14 by Egyptian state buyer GASC spurred a bounce in Chicago futures on Monday by showing potential demand for increasingly competitive U.S. supplies.
“We’ll have to see how the Americans react later in the day, but we’ve found a good fundamental support factor for wheat,” one European trader said.
Analysts also said Friday’s drop in wheat was excessive given that the USDA also estimated winter wheat sowings for the 2014 harvest were down on the year, confounding market expectations.
March wheat rose 0.8 percent to $5.73-1/4 a bushel, to pull away from Friday’s low of $5.60-1/2, a 3-1/2 year low for spot prices.
In oilseeds, March soybeans fell 0.4 percent to $12.73-1/4 a bushel, after rising moderately on Friday following USDA estimates that were broadly in line with expectations.
Soybean production was seen at a record high of 3.289 billion bushels, up 1 percent from November but close to the average estimate of 3.279 billion.
