Corn Futures Rally as USDA Reports Inventory Drop; Soybeans Gain

Corn rose to the highest price this month after the government said U.S. stockpiles will be smaller than expected, heightening concern that costs for food and fuel will climb. Soybean prices also gained.

U.S. corn inventories before next year’s harvest may total 870 million bushels, the lowest since 1996, the Department of Agriculture said today. Analysts in a Bloomberg News survey expected 1.029 billion. The USDA boosted its export forecast and said a record 5.15 billion bushels will be used to make ethanol, more than estimated last month.

“We’re a lot more inelastic on corn demand than people think,” said Jason Britt, the president of brokerage Central States Commodities Inc. in Kansas City, Missouri. “Sure, the world economy is going into a horrible funk, but there’s still a certain amount of animals that have to be fed and a certain amount of ethanol that’s going to be produced.”

Corn futures for December delivery rose 25.25 cents, or 4 percent, to close at $6.58 a bushel at 1:15 p.m. on the Chicago Board of Trade, after touching $6.61, the highest for the most-active contract since June 29. The price was up 68 percent in the past year.

Soybean futures for November delivery gained 11.25 cents, or 0.8 percent, to $13.5825 a bushel on the CBOT, climbing for a seventh straight session, the longest rally since December. The most-active futures have gained 43 percent in the past year.

Global food costs climbed to a record in February, a United Nations index showed. High grocery prices and corruption have spurred unrest this year in the Middle East and northern Africa, where the leaders of Tunisia and Egypt were ousted. The U.S. is the world’s largest exporter of corn, soybeans and wheat.

Consumption Rising

Corn consumption globally will rise 4.1 percent to 877.6 million metric tons in the year that begins Oct. 1, from a record 842.8 million this year, the USDA said. World inventories before the 2012 harvest will fall to 115.66 million tons, from 120.88 million. Stockpiles will be equal to about 13 percent of consumption, the lowest since 1974, USDA data show.

World wheat and soybean inventories will fall for a second straight year, the USDA said. Wheat supplies before the 2012 harvest will fall to 182.2 million tons from 190 million estimated on June 1 this year, the agency said. Soybean reserves on Oct. 1, 2012, will fall 5.9 percent to 61.97 million tons, down from 65.88 million this year.

“We are not rebuilding inventories in the U.S. or the world,” said Sal Gilbertie, the president of Santa Fe, New Mexico-based Teucrium Trading LLC, which last year started an exchange-traded product linked to corn futures. “As global consumption goes up, the competition for acreage will increase from all crops.”

U.S. Exports Surge

Exports of agricultural products from the U.S. jumped to $60.2 billion in the first five months of 2011, up 33 percent from a year earlier, the government said last month. Shipments last year climbed 18 percent to a record $115.81 billion. China became the leading market for U.S. farm goods by boosting purchases 34 percent.

China, the biggest buyer of soybeans, became a net importer of corn last year for the first time since 1996. The USDA said today that China will import 2 million tons of corn in the year that begins Oct. 1, up from an estimated 1.5 million this year.

“China is the most critical factor for prices,” and there are no signs that demand is slowing, Gilbertie said. “Unless we have a major economic hiccup,” livestock producers will buy “more corn to produce more meat,” he said.

Prices accelerated to session highs after midday forecasts for hot, dry weather in the U.S. Midwest, threatening yield potential as corn and soybeans begin to reproduce, said Mark Schultz, the chief analyst for Northstar Commodity Investment Co. in Minneapolis.

Temperatures will average 7 degrees to 12 degrees Fahrenheit warmer than usual from July 14 to July 20 with above-normal temperatures and drier weather continuing to July 25, T-Storm Weather LLC in Chicago said in a report to clients.

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