U.S. grains: Soy rallies on USDA demand outlook

U.S. soybean futures rose to a two-week high on Friday after the government predicted that stronger global demand would soak up more of the bumper crop than had been expected this year, traders said.

Corn futures firmed, their first positive session since Oct. 29, after the U.S. Agriculture Department’s outlook for a record corn crop missed expectations. Wheat closed lower, pressured by large supplies.

Soybeans notched the biggest move, with the front-month contract rising 2.1 per cent, the biggest bump in percentage terms since Sept. 13. A rally in soymeal prices added
additional strength to soybeans.

“The biggest surprise on the report was soybean world carryover coming in lower than expected, said Ted Seifried, vice-president at the Zaner Group. “The world number in beans was a little bit bullish and maybe we should rally on that.”

Chicago Board of Trade January soybean futures were 29-1/2 cents higher at $12.96 a bushel (all figures US$). The November soybean contract, which is in the delivery period, gained 27-1/4 cents to $13.06 a bushel.

The corn market’s reaction was muted, surprising traders who have grown to expect fireworks in the market after the monthly reports are released.

CBOT corn for December delivery was up 6-1/4 cents at $4.26-3/4 a bushel. Prices had traded lower before the numbers hit the market. CBOT December soft red winter wheat was down 3-1/4 cents at $6.49-3/4 a bushel.

“It’s a little like expecting a red wagon for Christmas and getting socks and underwear,” said Chris Manns, president, of Traders Group Inc. “There is absolutely nothing in here.”

For the week, soybeans were up 3.1 per cent, corn fell 0.2 per cent and wheat dropped three per cent.

Traders were particularly keen on the November USDA production and supply and demand reports after the department scuttled the release of the October report because of the 16-day partial shutdown of the federal government.

Corn’s drop to a three-year low in the days leading up to the report had already priced in a record crop so there was little room for the market to fall after the bearish supply numbers came out. Investment funds’ record short position on the commodity also provided a base of support.

“When you look at the overall numbers, you are still in a supply bear market on corn,” said Don Roose, analyst at U.S. Commodities. “We have cooled the fever, it does not mean that the market is still not sick. The market was caught leaning to the negative side. I do not think on these numbers you go lower here short-term.”

USDA said that the U.S. corn production as expected to be 13.989 billion bushels, based on an average yield of 160.4 bushels per acre. That compares to market forecasts for a crop of 14.003 billion bushels and an average yield of 158.933 bushels per acre.

The U.S. soybean crop was pegged at 3.258 billion bushels, the third largest on record, with an average yield of 43 bushels per acre. Global ending stocks of soybeans were estimated at 70.23 million tonnes, more than two million tonnes below the average of trade forecasts.

In another sign of swelling global supply, Brazil on Friday raised its official forecasts for its 2013-14 corn and soybean harvests, with soy output seen at a record high.

Also, U.S. ethanol plants shut as long as five years are now coming back online as the record U.S. harvest has pushed down corn prices and improved profit margins for refiners.

— Mark Weinraub is a Reuters correspondent covering grain futures markets in Chicago. Additional reporting for Reuters by Sam Nelson and Karl Plume in Chicago.

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