World Bulletin/News Desk
U.S. corn and wheat stockpiles shrank far more this summer than grain markets thought, the government reported on Friday, and corn prices zoomed higher on prospects that heavy demand and drought-decimated crops will keep markets tight.
Corn futures surged nearly 6 percent and hit the daily limit on the Chicago Board of Trade after the U.S. Department of Agriculture reported corn stocks on Sept. 1 were below 1 billion bushels for the first time in eight years. Wheat futures rose more than 5 percent and briefly topped $9 a bushel.
"A sub-1 billion number is enough to get the market nervous," said Sterling Smith, futures specialist for Citigroup in Chicago, referring to corn. Smith said the surge in corn prices pulled up wheat and soybean prices too.
The worst U.S. drought in half a century has decimated crops, and tight supplies should keep commodity prices at record levels and boost prices at the grocery store.
USDA's survey of farmers and warehouses showed 988 million bushels of corn on hand -- 11 percent less than expected -- on Sept. 1. That date is the start of the corn marketing year and the traditional low point for supplies, as it comes before this year's harvest gets added to the stockpiles.
Wheat stocks of 2.1 billion bushels were 7 percent smaller than traders expected. Soybean stocks were much larger than expected. It was the third straight year that the USDA's September inventory report surprised traders. Many analysts had expected stockpiles to rise because the corn harvest started early this fall.
But supplies shrank. Even with corn prices soaring to $8 per bushel earlier this year, demand remained heavy from exporters, livestock farmers, ethanol plants and food makers.
Corn futures were limit up -- at the daily ceiling -- at $7.56-1/2 a bushel in Chicago at midday. "Synthetic" bids indicated corn was worth $7.59 a bushel. Wheat consumption was up by 27 percent for June-August compared to one year ago, USDA said. Jason Kitt of The Linn Group said livestock producers who predominantly use corn in feed rations are increasingly turning to wheat.
The number "implies pretty good wheat feeding during the quarter, which is supportive -- wheat is corn again," Kitt said.
Livestock feeders use wheat as feed when corn is scarce and expensive. While U.S. corn production has declined for three years in a row, growers harvested 2.27 billion bushels of wheat this year, the largest crop in eight years. Wheat futures sold for $8.98 a bushel, up 5 percent, at midday on Friday.
Don Roose, president of U.S. Commodities, said corn consumption for June-August was larger than expected, "so we're going to hear talk that we're going to have to do a better job of rationing in the feed sector. That's not easy to do."
U.S. food producers also hope they can reduce pressure on corn supplies by convincing the U.S. government to relax a federal mandate to use corn-based ethanol in gasoline.
Governors of seven U.S. states have petitioned the Obama administration to ease the mandate, saying high corn prices were punishing meat, poultry and dairy farmers. Grain supplies data could play a part in the decision, possible in November.
U.S. meat production is projected to fall this year and in 2013 because of high grain prices.
Soybean stockpiles totaled 169 million bushels at the start of this marketing year, much larger than expected, despite heavy consumption late in the 2011/12 marketing year.
USDA also revised its estimate of the 2011 soybean crop to 3.09 billion bushels, up 1 percent. The 37 million-bushel
increase was roughly the same as the difference between the stockpile figure and trade expectations for stocks.
Overnight lending rate gets cut by 25 points to 8.50 percent; overnight borrowing rate remains unchanged at 7.25 percent
"It appears that a programme of public spending in Germany would not be the most appropriate tool to help give a strong stimulus to the international economy," the central bank said following a study into the issue.
The 0.3 percent quarterly gain was in line with average forecasts compiled by data company Factset.
Qatari Ambassador to Ankara says bi-lateral trade could double through committment to undertake further investments in Turkey
Radical cleansing will start a new era in Turkey, says the head of the Turkish Cooperation and Development Agency (TIKA)
EU Commissioner for Jobs, Growth and Investment and Competitiveness Jryki Katainen told reporters "we should forget this phrase" when asked if that meant granting market economy status to China.
Militancy has reduced revenue from oil industry by half, senior official says
The grant was signed Monday in Nairobi to mitigate impact of forced displacements on refugee hosting communities in East Africa
The EU Trade Commissioner Malmstrom made the comment while speaking to Chinese students in Beijing ahead of a China-EU summit.
Trade Ministers Meeting in Shanghai concludes with pledge to push efforts toward trade liberalization and facilitation
Brexit raises uncertainty for consumer, investor confidence, ratings agency says
Bank of England Governor Mark Carney eases lending rules after vote for Brexit
Banca Monte dei Paschi di Siena, or BMPS, is among the banks at the forefront of those concerns with gross bad loans amounting to 46.9 billion euros ($52 billion).
Fund to be used in support of education, health, municipal, socio-economic support for refugees in Turkey