Grains Post Broad Gains on Short Supply

CHICAGO: US corn futures surged by the daily trading limit on Friday, adding 5.6 percent after the government said end-of-season stocks fell by a greater-than-anticipated 12 percent from a year ago, dipping below 1 billion bushels for the first time in 8 years.
Wheat futures jumped more than 4 percent, the strongest gain in 2-1/2 months, as the US Department of Agriculture said Sept. 1 stocks declined year-on-year, counter to trade expectations for an increase.
Soybeans followed corn higher, although gains in nearby contracts were tempered by a smaller-than-expected drop in ending stocks.
"The (ending stocks) number was bullish for the corn market, it was at the low end of estimates," said Sterling Smith, futures specialist for Citigroup.
"A sub-one-billion (bushel) number is enough to get the market nervous. Combine that with the market getting oversold the past month and it's leading to pretty good gains," he said.
The US corn stockpile was 11 percent below analysts' expectations at 988 million bushels, USDA said on Friday in a surprising report that presaged razor-thin supplies for the third year in a row.
USDA also said its survey of farmers and warehouses showed the soybean stockpile at the Sept 1 start of this marketing year was 29 percent, or 38 million bushels, larger than what traders had expected.
Wheat stocks also were surprisingly low, coming in eight percent below trade estimates.
"(Corn) feed use in the fourth quarter was bigger than people had thought so we're going to hear talk that we're going to do a better job of rationing in the feed sector. That's not so easy to do," Said Don Roose, president of US Commodities.
December corn futures on the Chicago Board of Trade surged 40 cents, or 5.6 percent, to $7.56-1/4 a bushel by 10:29 a.m. CDT (1429 GMT) after dipping to a three-month low of $7.05 before the report. It was the steepest rally for a spot month contract since July 5.
Corn futures were on pace for the first weekly gains in four weeks.
CBOT December wheat climbed 40 cents to $8.95-1/2 a bushel, a 4.7 percent gain that was the largest for a front-month contract since July 16.
November soybeans were up 6-1/2 cents, or 0.4 percent, at $15.77-1/4 a bushel. Still, the front-month soybean contract was poised for their second consecutive weekly decline and the steepest two-week drop in nearly a year.
Copyright Reuters, 2012