Chicago | Reuters — U.S. corn futures jumped Friday on quarter-end positioning and government crop data that signalled livestock producers had not cut back on feeding the grain in favour of wheat, as some traders had expected.
Prices rose after the U.S. Department of Agriculture, in a quarterly crop report, said 1.738 billion bushels of corn were in storage as of Sept. 1. That was fewer than analysts on average had expected, indicating that livestock producers had fed more corn to their animals than anticipated, said Brian Hoops, president of brokerage Midwest Market Solutions.
End-of-quarter short covering was noted as helping the rally, after USDA issued its data, ED+F Man Capital Markets analyst Charlie Sernatinger said in a note to clients.
The agency further fuelled ideas that livestock producers had stuck with corn as feed, instead of switching to wheat, by reporting that 2.527 billion bushels of wheat were in storage at the start of the month. That topped analysts’ expectations.
In a separate report released at the same time, it estimated that U.S. all-wheat production was lower than analysts had expected at 2.31 billion bushels.
Some traders and analysts had projected that wheat feeding would increase in the past quarter because prices were under pressure from massive global supplies.
From June to August, USDA raised its estimate for wheat used for feeding and other “residual” purposes by 65 per cent to 330 million bushels. The department is likely overstating that usage by 100 to 125 million bushels, Rich Feltes, head of market insights for R.J. O’Brien, said after seeing Friday’s inventory data.
“We had felt like USDA was overestimating wheat feeding from the beginning, that there was too much cheap corn and sorghum out there,” said Arlan Suderman, chief commodities economist for INTL FCStone. The other crops can also be fed to livestock.
Chicago Board of Trade most-active corn gained 7-1/2 cents to $3.36-3/4 a bushel (all figures US$). The contract had been trading lower before USDA issued its stocks data.
Most-active wheat was three cents higher at $4.02 a bushel, and soybeans were up 3-3/4 cents at $9.54 a bushel.
The corn rally was expected to fizzle quickly, as U.S. inventories remain historically large after massive domestic harvests. A record-large harvest this autumn is expected to add to supplies.
“The bottom line is we still have a lot of corn and we have even more wheat,” Suderman said.
— Tom Polansek reports on agriculture and ag commodity markets for Reuters from Chicago. Additional reporting for Reuters by Naveen Thukral in Singapore and Gus Trompiz in Paris.