Process Management

News 1317 views last update:6 Aug 2012

Grain prices soar as US cuts supply view

Grain prices soared after the US Department of Agriculture made another deep cut in its outlook for global supplies.

The USDA again revised downward its estimate for the size of last year's corn and soybean harvest in the US.
End-of-season inventories of corn, already expected to be at a 15-year low, were cut by more than 10%. Harvest estimates were trimmed for key export countries abroad.
Low global supply
The closely watched monthly crop reports provided yet more confirmation that world supplies are approaching precariously low levels.
The devastating drought and wildfires in Russia last summer was a shock to grain markets followed by a disappointing US harvest.
More recently, crops are hurting from a drought in Argentina, dryness in the US Plains and torrential rains in Australia.
What to plant
A tug-of-war is expected among crops as farmers in the US decide what to plant this spring. High prices for wheat, soybeans and cotton will entice farmers to plant more of those crops, and that could mean corn supplies won't grow back to comfortable levels until 2013 or 2014, a JP Morgan analyst said.
In its first estimate of how much winter wheat was sown this fall, the USDA said 41 million acres were planted.
This was in line with expectations, but still remains below 2008 levels in part because some farmers likely are forgoing wheat to focus on soybeans.
Maximum price increase
At the Chicago Board Of Trade, corn and soybean futures surged the most they're allowed to per exchange limits, before pulling back to settle at more than two-year highs.
Corn for March delivery, the most-active contract, closed up 4% to $6.31 a bushel, while soybean futures for January delivery, settled up 4.3% to $14.09 a bushel. Wheat prices jumped 1.5% to $7.70 1/2 a bushel.

Dick Ziggers

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