Bloomberg News

Corn, Wheat, Soy Rise, Renewing Food-Inflation Concern

March 30, 2012

Seed corn is loaded into a tractor trailer from a grain bin in Sheffield, Illinois. Photographer: Daniel Acker/Bloomberg

Seed corn is loaded into a tractor trailer from a grain bin in Sheffield, Illinois. Photographer: Daniel Acker/Bloomberg

(Corrects first paragraph to add dropped ‘2010.’)

Corn prices surged the most since June 2010, wheat had its biggest gain in five months, and soybeans rallied after government forecasts signaled tighter U.S. crop supplies, renewing concerns that food inflation will quicken.

Corn inventories on March 1 fell more than analysts forecast to the lowest for this time of year since 2004, the U.S. Department of Agriculture said today in a report. Wheat reserves dropped to a three-year low, and planting intentions trailed estimates. Farmers will sow 73.902 million acres with soybeans this year, down 1.4 percent from 2011 and the lowest in five years, the agency said after surveying farmers.

Global food prices rose to an all-time high last year, triggering unrest in northern Africa and the Middle East. The United Nations said this month that grain imports by the world’s poorest countries will climb to a record in the 12 months ending June 30. The U.S. was the world’s biggest exporter of corn, soybeans and wheat last year.

“There is no question we will see higher food prices this year,” Steve Nicholson, a commodity procurement specialist at International Food Production Corp. in Fenton, Missouri, said in a telephone interview. “You have to see prices go up to stimulate global production and ration declining supplies.”

On the Chicago Board of Trade, corn futures for May delivery jumped by the exchange limit of 40 cents, or 6.6 percent, to close at $6.44 a bushel at 1:15 p.m. That was the biggest gain for a most-active contract since June 30, 2010. The advance pared the decline for the quarter to 0.4 percent.

Archer Daniels, Tyson

Tightening grain supplies increase costs for makers of corn-based ethanol such as Archer Daniels Midland Co. and for meat companies including Smithfield Foods Inc. (SFD:US) and Tyson Foods Inc. (TSN:US) The U.S. retail price of beef, pork chops, chocolate chip cookies, cheddar cheese and sugar rose to records in January.

Stockpiles of corn on March 1 fell 7.9 percent to 6.009 billion bushels from a year earlier, the USDA said. Analysts in a Bloomberg survey expected 6.16 billion, on average. The agency’s estimate of consumption in the three months ended Feb. 29 unexpectedly rose 3.1 percent to a record 3.64 billion bushels. That figure includes use in food, livestock feed and fuel, along with exports and waste.

Wheat

Wheat inventories as of March 1 fell 16 percent to 1.201 billion bushels from a year earlier. The average estimate by analysts in the Bloomberg survey was 1.25 billion.

Wheat futures for May delivery rose 7.9 percent to settle at $6.6075 a bushel in Chicago, the biggest gain since Oct. 11. Most-active futures rose 1.2 percent during the past three months.

On the Minneapolis Grain Exchange, spring-wheat futures jumped the most in 10 months after the USDA said farmers will cut plantings to seed more corn, soybeans, barley and other crops.

Spring-wheat planting will fall to 11.976 million acres from 12.394 million a year earlier, the agency said. Analysts projected 13.35 million, on average.

“People expected more spring-wheat planting, and farmers say they want to plant other crops,” Dave Marshall, a farm- marketing adviser at Toay Commodity Futures Group Inc. in Nashville, Illinois, said in a telephone interview. “That’s a sign that prices are not high enough to compete.”

The soybean-seeding forecast was about 1.5 million acres below the average estimate of analysts and almost 1.1 million less than a year earlier. Farmers told the USDA that they plan to cut the planted area in seven of the top-eight producing states.

Weather Risk

“Given the long season ahead and the risk of weather disruptions along with low inventories, the outlook for soybean and corn crops remains bullish,” Rabobank International said today in a report. “The upside risk is considerable, and if crop potential is threatened by weather, we would expect prices to visit new highs.”

Soybean futures for May delivery surged 3.5 percent to close at $14.03 a bushel on the CBOT, the biggest gain since Oct. 11. Earlier, the price touched $14.16, the highest since Sept. 12.

The price jumped 16 percent in the first quarter after dry weather reduced crops in South America. Brazil is forecast by the USDA to be the largest exporter this year, topping the U.S. for the first time.

To contact the reporters on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net; Tony C. Dreibus in London at tdreibus@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net


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