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.
If Russian oil giant Rosneft's request for $49 billion from the government is not met, Russia could face larger budgetary and revenue problems, say experts
China launched the first stage of an Asian development bank, in what is widely seen as a challenge to U.S.-backed international banks.
Aid agencies are tentatively also giving away cash and letting refugees decide for themselves what they need. The money is being wisely spent and rarely wasted
The research firm IHS estimated this week that ISIL militants were producing about $2 million worth of crude oil a day before recent U.S.-led air strikes.
The conflict between Turkish and Greek Cypriots on the island continues over the ownership of the hydrocarbon reserves in the exclusive economic zones off the shore of the island
Aeroplane maker company Boeing sells plane parts to Iran, as part of easing the sanctions and first step since 1979
OPEC's second-largest producer, Iran is normally among the first members of the oil producers' group to call for supply cuts to support prices.
The 21-member Asia-Pacific Economic Cooperation (APEC) bloc said they would advance structural reforms to unleash new sources of growth.
Ukraine needs to pay its previous debt to Russia by the end of the year and pay in advance for getting new volumes of natural gas
The loss of Khafji's 280,000 barrels per day of Arabian Heavy crude will be felt more in Kuwait, which has far less spare output than its neighbour
Under Lufthansa's proposals, pilots would still be able to retire early, but the age would gradually increase to 60 from 55.
Labor tension on the rise as high inflation reduces spending power.
Third quarter growth was lowest in more than five years, threatening annual target
De Margerie was killed when a business jet collided with a snow plough during takeoff at Moscow's Vnukovo International Airport overnight, the company and airport officials said.
Stabilised political and security situation, the launch of government initiatives toward fiscal consolidation and strong support from external donors are some of the reasons given for improved economic outlook.