- Corn, soybeans also higher after government releases reports
- Hedge funds `had such a big short position' ahead of the data
Wheat prices jumped the most in two months, striking a rare bullish note amid a generally gloomy outlook for commodities, after U.S. government data showed farmers planted the smallest winter crop in six years. Corn and soybeans also rose.
U.S. farmers sowed 36.61 million acres of winter-wheat varieties, the U.S. Department of Agriculture said Tuesday in a report. That was less than the lowest estimate in a Bloomberg survey of analysts and would make the plantings the second-smallest since 1913.
The data shows that U.S. farmers may finally be taking action to rein in supply after bumper crops depressed prices for grains and soybeans. The USDA said via Twitter that the most common comments from farmers, in relation to the smaller winter wheat crop, cited weather and economics. Plantings of hard-red-winter wheat fell across most of the Great Plains and acreage was record low in Nebraska.
The USDA report “tells us a lot about farmer attitudes,” said Dale Durchholz, an analyst at AgriVisor LLC in Bloomington, Illinois. “The market has to consider the potential that low prices will cause farmers to curtail plantings” of corn and soybeans.
Wheat futures for March delivery gained as much as 3 percent on the Chicago Board of Trade and closed 2.6 percent higher at $4.8125 a bushel at 1:19 p.m. local time.
In the USDA’s World Agriculture Supply and Demand Estimates (WASDE) report, also out Tuesday, production estimates for last year’s U.S. soybean and corn crops were reduced. The lower yields curbed the increase in domestic Dec. 1 inventories. Soybean futures for March delivery rose 1.5 percent to $8.745 a bushel while corn futures for March delivery gained 1.4 percent at $3.5675.
While this year’s U.S. wheat crop may shrink, world supplies remain ample. The USDA boosted its forecast for global reserves before this year’s North American harvest by 0.9 percent to a record, citing larger production in Russia, Pakistan and the European Union, and reduced feed and food demand.
Prior to the government data’s release in Washington, the Bloomberg Commodity Index, a measure of returns from 22 raw materials, fell to its lowest since at least 1991. Oil slid to less than $30 a barrel while metal prices declined. Hedge funds are the most pessimistic ever on grain prices after previous increases in stockpiles of corn and soybeans, according to U.S. data as of Jan. 5.
“The funds had such a big short position and were expecting a big down day,” Ted Seifried, chief market strategist at Zaner Group LLC in Chicago, said by phone, referring to crop prices. “The fact that they didn’t get that, I think they’re running for the door.”
Overseas demand for U.S. crops remains slow. The USDA cut its projections for corn and soybean exports in the year ended Aug. 31. In the three months ended Nov. 30, consumption of U.S. corn fell 2.8 percent from the prior year, while soybean demand dropped 6 percent, according to the government.
“This report signals world supplies are starting to get a little smaller,” Jerry Gidel, chief feed grain analyst at Rice Dairy LLC in Chicago, said in a telephone interview. “It will take a more serious global weather threat to get a rally above $9 in soybeans and $3.75 in corn.”