Corn soared Wednesday, dragging oilseeds and wheat higher, after the U.S. Department of Agriculture slashed U.S. corn year end stocks to just 2 ½ weeks of supply.
March corn at one point topped $7 per bushel and settled at $6.98, up 24.25 cents.
USDA dropped year closing corn supply to 675 million bu., well down from the average of pre-report forecasts of 729 million.
That puts the stocks-to-use ratio at five percent.
The reduction was largely due to larger than expected corn use in ethanol and corn syrup production.
USDA made only marginal changes to U.S. wheat and soybean ending stocks.
Changes in South American soybean forecasts cancelled each other with USDA lowering its Argentina number by one million tonnes and increasing Brazil’s by the same amount.
But canola, soybeans, wheat and oats all rose, pulled higher by corn.
Wheat had some independent strength from recent strong demand and worries about the U.S. and China winter wheat crops. China television news has a story about the drought in its wheat crop at http://english.cntv.cn/program/newshour/20110209/104655.shtml.
The spread between soy oil and soy meal is the widest in 30 months as world veg oil fundamentals are stronger than for meal. Demand for the latter has weakened because of shrinking livestock herds.
Veg oil supply is affected by reduced palm oil supplies because of recent excess rain and the rising amount of veg oil going into biodiesel recently.
Strong veg oil prices are good for canola, which has higher oil content than soybeans.
But Reuters reported that Thomas Mielke, editor of Oil World, said there would be downward pressure on veg oil prices later this year.
The current high price is killing demand from European biodiesel makers and palm oil production should ramp up later this year.
He noted that canola oil is $800 per tonne more expensive than crude petroleum oil. European countries have biodiesel mandates but oil refineries will find it cheaper to pay penalties to miss the mandate than to pay for expensive veg oil, he said.
We will have more on this issue in the Feb. 17 Western Producer.
In Winnipeg, March canola rose $5.10 to $617.10 per tonne on 11,562 trades.
May rose $5.20 to $625.80 on 7,684 trades.
The new crop November 2011 contract rose $5.60 to $605.
The previous day’s best basis was $12.90 under the March contract according to ICE Futures Canada in Winnipeg.
The March contract 14-day Relative Strength Index was 68. The rule of thumb is an RSI of 30 indicates an over sold market and 70 indicates an over bought market.
March barley futures were steady and untraded at $194. May and July were $205 per tonne.
Chicago March soybeans rose 16.75 cents to $14.63 per bushel.
March corn rose 24.25 cents to $6.51 per bu.
March oats rose five cents to $4.245 per bu.
March Minneapolis hard spring wheat rose 17.5 cents to $10.27 per bu.
New crop December rose 17.25 to $10.455.
In New York, crude oil for March delivery fell 23 cents to $86.71 US per barrel.
The Canadian dollar at noon was $1.0053 US, down from $1.0095 the previous trading day. The U.S. dollar at noon was 99.47 cents Cdn.
The Toronto Stock Exchange composite index fell 108.22 points to 13,784.30. Stocks fell on profit taking after recent gains. Also, worries linger over Chinese demand for metals as it raises interest rates to fight inflation.
The Standard & Poor’s 500 Index fell 3.69 points to 1,320.88. There was an error in Tuesday’s S&P 500 number. It should have said it gained 5.52 points to close at 1,324.57.
