Bloomberg Agriculture Corn and Saybean

Corn Surges to Six-Month High as U.S. Inventories May Dwindle

May 12 (Bloomberg) -- Corn prices surged to a six-month high after the U.S. government said domestic demand will exceed production for the third time in four years, slashing reserves by 28 percent.

Inventories on Aug. 31, 2010, will fall to 1.145 billion bushels from an estimated 1.6 billion a year earlier, the U.S. Department of Agriculture said today. Eighteen analysts surveyed by Bloomberg News forecast 1.313 billion, on average. Demand for corn to make food, livestock feed and fuel will rise 3.5 percent in the next marketing year as output declines 0.1 percent.

“Supplies are tightening up very quickly, and that will put corn in a more positive light,” said Greg Grow, a director of agribusiness for Archer Financial Services in Chicago. “The crop could end up smaller than the USDA forecast because of the wet weather delaying planting.”

Corn futures for July delivery rose 6.25 cents, or 1.5 percent, to $4.275 a bushel on the Chicago Board of Trade. Earlier, the price reached $4.3175, the highest for a most- active contract since Oct. 30. The grain is still 30 percent cheaper than a year ago.

Soybeans Rise as Smaller South American Crops Cut U.S. Reserves

Soybean prices rose for the third straight session as declining South American production boosts demand for shrinking U.S. supplies.

Inventories on Aug. 31, before the next harvest, will total 130 million bushels, down from 165 million estimated in April and 205 million bushels on hand a year earlier, the U.S. Department of Agriculture said today. U.S. inventories represent 4.3 percent of projected use, the tightest supply ratio since 1966, USDA data show.

“It’s a very tight inventory,” said Jim Gerlach, the president of A/C Trading Inc. in Fowler, Indiana. “There’s more upside” until prices rise high enough to slow demand, Gerlach said.

Soybean futures for July delivery rose 1.5 cents, or 0.1 percent, to $11.175 a bushel on the Chicago Board of Trade. On May 7, the price reached $11.31, the highest for a most-active contract since Sept. 29.

Estimated global production this year will fall to 212.8 million metric tons, compared with 218.8 million tons forecast a month ago and a record 221.1 million tons harvested last year, because of smaller crops in South America, the USDA said.

Global consumption this year is forecast at 222.5 million tons, compared with 225.4 million tons projected in April. Inventories on Oct. 1, before the Northern Hemisphere harvest, will fall to 42.6 million tons from 45.8 million estimated in April and from 53.1 million tons last year, the USDA said.