Corn futures in Chicago soared the daily 30-cent limit and soybean prices also rallied sharply after government data exacerbated concern over dwindling U.S. grain stockpiles.
The nation’s corn and soybean supplies at the beginning of March fell to unexpectedly low levels, based on a U.S. Department of Agriculture report released earlier March 31. In a separate report, the USDA said it expects American farmers to reduce soybean plantings this spring, though corn acreage will rise to the second-highest total since the end of World War II.
With the spring planting season just beginning and harvest six months away, today’s reports only fueled anxiety over tight corn and soybean supplies, traders and analysts said. Demand from ethanol makers, livestock feeders and exporters remains strong, leaving little margin for error during the upcoming growing season.
Supplies are “razor-thin,” said Matthew Connelly, a corn options broker on the CME Group trading floor in Chicago. “If we go from a wet, cool spring to a hot, dry summer, that’s not good. That will get things going” in the grain markets.
If Midwest weather turns unfavorable, “we could be talking about $10 corn and $20 soybeans,” Connelly said.
In trading March 31, corn futures contracts for delivery from May through July 2012 all rose 30 cents, the maximum daily move allowed by CME. May futures settled at $6.93 ¼ a bushel and December ended at $6.25 ¼. Corn futures reached a 32-month high of $7.35 on March 4.
May soybean futures rose 38 ¼ cents to $14.10 ¼ a bushel, while November futures rose 31 ½ cents to $13.95.
Farmers favoring corn over soybeans
Corn prices were the top-performer among major U.S. grains last year - rising 52 percent, based on CME futures - and the market continued to soar in 2011. High prices have boosted expected returns from planting corn compared with other crops, encouraging more acreage, the USDA said in its annual Prospective Plantings report March 31.
Farmers will plant an estimated 92.18 million acres to corn, up 4.5 percent from 88.19 million in 2010, the USDA said. The projected acreage for 2011 would trail only 2007 plantings of 93.5 million acres as the highest total since 1944.
Analysts on average expected corn plantings at about 91.8 million acres, based on a Dow Jones Newswires survey.
Much of the increase in corn will come at the expense of soybeans. Iowa, Kansas, Mississippi, Nebraska and Ohio are among states where farmers are expected to plant more ground to corn and less to soybeans. In North and South Dakota, corn acres are projected to surge 22 percent and 19 percent, respectively, according to the USDA.