(Wall Street Journal) – Corn and soybean prices surged to their highest levels in months after the government estimated growers had planted less than analysts expected and that less of it is held in stockpiles, extending a recent rally in grain prices.
Wheat also hit a multimonth high, despite government forecasts of plantings and inventories slightly higher than expected.
In a quarterly report Tuesday, the U.S. Agriculture Department added to bullishness for grain prices that already have risen sharply in recent weeks after months in the doldrums. Prices have jumped largely because of drenching rains in parts of the Midwest, which have prevented the harvesting of wheat crops and delayed the planting of soybeans.
“The somewhat friendly acreage and stocks numbers add up to amplify the impact of this wet weather,” said Kurt Koester, president of Iowa-based grain brokerage AgriSource Inc.
The USDA said corn stockpiles on June 1 totaled 4.447 billion bushels, compared with 3.852 billion bushels on that date last year. Analysts surveyed by The Wall Street Journal had expected the government to boost stockpiles to 4.512 billion bushels of corn.
A separate USDA report estimated that growers had planted 88.897 million acres of corn this year, down from 90.597 million last year. Analysts had forecast 89.173 million acres.
Corn futures for July delivery soared to a six-month high, rising 30.75 cents, or 8%, to $4.14 a bushel at the Chicago Board of Trade, the highest settlement price since Dec. 26. The jump marked the biggest one-day percentage gain in corn futures since June 30, 2010. On that day, futures rose 9%.
The smaller-than-expected estimates of stockpiles and the damaging weather are forcing traders and investors to recalibrate their views on how much grain the U.S. will produce come harvest time, said Doug Bergman, analyst with RCM Asset Management. “When you start using that acre number with probably lower national yields than what we’re currently looking at, the balance sheet has the potential to be pretty tight,” he said.
Soybean prices rose to the highest level in more than seven months after the USDA forecast smaller-than-expected supplies at the beginning of June, estimating inventories on June 1 at 625 million bushels, up from 405 million a year earlier, according to the USDA. Analysts had expected 674 million bushels.
The USDA estimated growers will plant 85.139 million acres of soybeans this year, compared with 83.701 million last year. Analysts had expected soybean acres to total 85.187 million.
CBOT July soybean futures jumped 53.75 cents, or 5.4%, to $10.5625 a bushel, the highest closing price since Nov. 11.
Ahead of Tuesday’s report, analysts warned that the USDA’s estimate for soybean acreage likely would overstate actual planting since it reflects intentions at the beginning of the month—before drenching rains prevented many growers from seeding their fields. Up to three times the normal amount of precipitation has fallen in states such as Missouri, Illinois and Indiana in the past month, according to the National Weather Service. Afterward, the USDA said it would resurvey soybean growers in Arkansas, Kansas and Missouri and issue any revised planted acreage estimates in an August report.
Wheat prices rose to a six-month high, despite USDA data showing larger-than-expected U.S. stockpiles at the beginning of June. Wet weather in June swamped wheat crops, helping bolster prices despite bearish government data.
U.S. wheat inventories as of June 1 totaled 753 million bushels, up from 590 million on that date in 2014. Analysts had forecast 713 million bushels.
The USDA expects domestic growers to plant 56.079 million acres of wheat this year, compared with 56.822 million in 2014. Analysts had expected 55.651 million acres.
CBOT July wheat futures added 34.25 cents, or 5.9%, to $6.1475 a bushel, the highest settlement price since Dec. 29.
Analysts said wheat prices drew strength from sharp gains in nearby corn and soybean markets. “You’re not going to be able to keep wheat down with corn and beans up this far today,” said Mike O’Dea, risk-management consultant for commodity brokerage INTL FCStone.
Overall, Mr. Koester of AgriSource said hedge funds and other investors that wagered on bumper crops in the U.S. now are being forced to rethink those positions. Closing out bets on lower prices likely was fueling part of Tuesday’s rally in grains, he said.
“This speculative group betting on another perfect growing season is realizing every day that they could be in a wrong position,” Mr. Koester said. “This caught everybody by surprise.”
