Tight U.S. seeding report drives up prices

The U.S. Department of Agriculture added some planks to the floor under crop prices with recent reports, but whether that floor is strong enough to let prices leap isn’t yet clear, analysts say.“The trade has been given a very fundamentally supportive report and the market’s job will be to follow through,” said independent grain market analyst Greg Wagner to reporters following the release of USDA acreage and stocks reports on June 30.“It will have to follow through if we are not to be stuck in an extended trading range.”Analysts and traders are keenly watching for the yield estimates in the July 9 USDA report to see whether it fundamentally changes the picture painted in the previous week’s reports.Immediately after the reports were released June 30, corn futures prices rose the limit, dragging wheat prices along with them. But soybean and canola prices were left out of the rally, with slightly bearish soybean acres reported.Soybean area was pegged at 78.868 million acres, up from the March estimate of 78.14 million and the analysts’ average of 78.183 million.USDA reported that 87.872 million corn acres were seeded, more than a million acres less than the March estimate. The average of analysts’ pre-report guesses was 89.229 million.USDA put corn stocks as of June 1 at 4.31 billion bu., six percent less than expected due to record ethanol production and strong export demand.World markets have become sensitive to corn stocks numbers. Even with large crops year after year, stocks don’t grow because demand grows so quickly.“We’re just one step away from a major problem if something globally, from a crop standpoint, happens,” said Jim Bower of Bower Trading.Canadian Wheat Board market analyst Bruce Burnett noted that stagnant corn stocks levels are bullish because of the increased consumption, leaving stocks-to-use ratios tight.“It’s just as tight as it was three to four years ago,” said Burnett.The strength in corn prices following the report helped strengthen wheat prices, even though the wheat numbers in the report were not bullish.USDA said U.S. farmers planted 54.3 million acres of wheat, one percent more than the trade expected. Wheat stocks were 973 million bu., four percent more than the trade guess.Jonathon Driedger of FarmLink Marketing Solutions said it remains to be seen if the tighter corn situation can inspire a general crop market rally.“It has the potential to spill over into other markets,” said Driedger.But wacky Canadian and overseas weather are also major influences now, so feed markets north of the border will be at least as affected by the abandonment of barley acres.“These reports were somewhat supportive to feedgrains up here, but it’s not direct,” said Driedger. “Our market has its own dynamics.”The USDA’s yield estimates for corn in the July 9 report are vital because rising yields have often been able to compensate for acreage or stocks shortfalls. But because of the strong growth of corn yields in recent years, traders have had difficulty guessing USDA projections since they are well above trend line growth.The pre-July 9 estimate is 163.5 bu. per acre, which is 2.7 bu. per acre above the long-term trend, said Greg Wagner, an independent grain market analyst.Prudential Bache Commodities of Chicago thinks USDA will raise that estimate to 165 bu. per acre while Allendale, Inc., in McHenry, Illinois, thinks the estimate will be 167 bu.A Reuters analysis of USDA data showed that by raising its yield forecast by 1.55 to 165.05 bu. per acre, USDA could maintain the production forecast of 13.37 billion bu. set in its June 10 supply and demand report.Joe Victor of Allendale said corn futures price gains would not be maintained if yield expectations are raised.