Crop prices closed sharply higher, but below their daily peaks, after a U.S. Department of Agriculture report reduced its estimate of U.S. end of year stocks to levels lower than expected.
March canola closed up $10.80, just 40 cents shy of $600 per tonne, but earlier in the day was as high at $608.
USDA said that by the end of the crop year soybean stocks will be just 140 million bushels, 10 percent below analyst expectations. Corn stocks will drop to 745 million bu., four percent lower than what the trade had forecast and the smallest supply since 1995.
The soybean stocks-to-use ratio would drop to 4.2 percent, the lowest in 30 years and the corn stocks to use would be the lowest in 15 years.
Adding momentum to the rally were a strong stock market and rising crude oil prices. Markets were cheered that debt-troubled Portugal found good demand for a bond issue. Japan and China said they would support European countries struggling with debt. That put traders in positive frame of mind, causing them to invest in commodities. Strong commodities pushed the Canadian dollar to the highest level in two and a half years.
The main reason for the reduction in USDA’s ending stocks forecast was a downward revision in its assessment of how much corn and soybeans were harvested last fall. The department said hot weather in August sapped yields more than thought previously.
The USDA released its first estimate of U.S. winter wheat plantings. At 40.99 million acres it represented a 10 percent increase over last year, which was the lowest level since 1913.
USDA cut its soybean forecast for drought stricken Argentina to 50.5 million tonnes from a previous forecast of 52 million. However, Argentina’s deputy secretary of agriculture on Wednesday said the crop would “for certain” be less than 50 million tonnes.
USDA held the line in its soybean forecast for Brazil, which is generally enjoying good growing weather.
Additional support stemmed from news Argentine farmers plan to halt all grains and oilseeds sales for a week beginning Monday to protest the government’s export policies in the wheat and corn market.
In Winnipeg, most traded March canola rose $ 10.80 to $599.60 on 15,903 trades. At one point canola was as high as $608 before falling back on profit taking.
The January canola contract rose $10.80 to $593.10 per tonne on no trades. The contract expires Jan. 14.
The November 2011 contract rose $8.90 to $553.90.
The previous day’s best basis was $23 under the March contract according to ICE Futures Canada in Winnipeg.
The March contract 14-day Relative Strength Index was 61. 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 at $194. There are only two contracts in open interest.
Chicago January soybeans rose 84.5 cents to $14.09 US per bushel. Most traded March rose 58 cents to $14.15.
March corn rose 24 cents to 6.31 per bu.
March oats rose 12.5 cents to $3.945 per bu.
March Minneapolis hard spring wheat rose12.25 cents to $8.775 per bu.
In New York, crude oil for February delivery rose 75 cents to $91.86 US per barrel.
The Canadian dollar at noon was $1.0138 US, up from $1.0098 the previous trading day. The U.S. dollar at noon was 98.64 cents Cdn.
The Toronto Stock Exchange composite index ended up 59.16 points to 13,460.21.
Standard & Poor’s 500 Index was up 11.48 points to 1,285.96.
