Wheat Declines on Pakistan Wheat Speculation as Country Lifts Export Ban

By Jae Hur
Wheat dropped for a second day in Chicago on speculation Pakistan may export the grain after a shipment ban was lifted and as a price advance to a four-month high attracted sellers. Corn and soybeans fell for the third day. >>> More

Crop Report 'Shocker' Ripples Through Agriculture Sector

CHICAGO (Dow Jones)-- Government forecasters slashed estimates for the U.S. corn harvest Friday, causing futures prices to surge while igniting shares of many agriculture companies. 

U.S. corn futures soared to a daily trading limit on the Chicago Board of Trade when the market opened, rising 30 cents, or 6%, to $5.82 1/4 a bushel -- near a two-year high. Soybean and wheat futures also hit their exchange-imposed trading limits at the market opening. 

"Shocker may be an understatement," said Jason Britt, president of Central State Commodities, a Kansas City brokerage. "It's very out of character for the USDA to lower the corn yield so much." 

The crop report spilled into equity markets with tractor makers such as Deere & Co. (DE) climbing on the news along with seed and fertilizer companies such as Monsanto Co. (MON). Livestock and poultry producers such as Smithfield Foods Inc. (SFD), meanwhile, traded lower on expectations that higher crop prices would increase feed costs. Longer-dated future contracts for cattle and hogs rose as well. 

The U.S. Department of Agriculture projected a national corn yield of 155.8 bushels an acre, well below last month's projection of 162.5 bushels and lower than analysts' average forecast of 159.9 bushels per acre. 

The USDA was projecting a record crop a couple months ago. But farmers have largely been disappointed as harvest progresses. The crop faced problems from excessive rains early in the season that washed away supplies of nitrogen, a crucial nutrient, and was also stressed by unusually hot night-time temperatures all summer. 

While many traders and analysts could see this year's corn crop yield drifting down to 155 bushels an acre, few expected the USDA to make such an aggressive revision so soon. The U.S. harvest is roughly 50% complete. 

"This is a very tight balance sheet we now have to live with for a long time," said Sal Gilbertie, lead manager of the Teucrium Corn Fund, an exchange-traded fund based on corn futures. 

Other agriculture commodities followed corn higher. Wheat and soybeans surged in part because both, like corn, serve as an animal feed. Livestock futures also climbed because feed is a major cost for producers. 

Stocks for farm machinery manufacturers and other agribusiness companies rose on prospects that higher prices for corn will provide farmers with more money to spend on equipment, fertilizer and seed. Tractor makers Deere, CNH Global (CNH) and Agco Corp. (AGCO) are all higher, along with seed and fertilizer companies Monsanto, CF Industries Holdings Inc. (CF) and Potash Corp. of Saskatchewan (POT). 

Shares for crop processors Archer Daniels Midland Corp. (ADM) and Bunge Ltd. (BG) also moved up as tight supplies of crops provide them with leverage to raise their prices. But meat and poultry producers, including Smithfield Foods, Tyson Foods Inc. (TSN) , Pilgrim's Pride Corp (PPC) and Sanderson Farms Inc. (SAFM), were lower in morning trading. 

Analysts said Friday's report reignites concerns that the market needs higher prices in order to discourage demand and stave off a supply crisis. The report could have other ramifications, since the government has yet to rule on a request to increase the amount of ethanol that can be blended in gasoline to 15% from 10%. 

"This could (heighten) the debate on moving ethanol blends higher, and 'food versus fuel,'" debate, Britt said.

-By Ian Berry, Dow Jones Newswires; 312-341-5778; ian.berry@dowjones.com

Corn Advances to Two-Year High on U.S., China Crop Concerns; Soybeans Jump

Corn advanced the highest in almost two years and soybeans traded at a 15-month high on concern flooding may damage crops in the U.S., the world’s largest exporter of both, and freezing weather in China. 

Corn for December delivery gained as much as 1 percent to $5.27 a bushel, the highest price for the most-active contract in Chicago since Sept. 29, 2008. November-delivery soybeans jumped as much as 1.6 percent to $11.4375 a bushel, the highest level for the most-active contract since June 5, 2009.

Western parts of the Midwest face further harvest delays this week as fields are very wet, and some areas remain flooded, Telvent DTN Inc. said in a forecast Sept. 24. Northeast China will likely have freezing conditions, after rain showers early this week, potentially hurting maturing soybean and corn crops, DTN said.

“There are so many concerns in the market right now,” Tetsu Emori, a commodity fund manager at Astmax Co. Ltd. in Tokyo, said by phone today. “That’s what’s attracting fresh investment into the commodity market. Hedge funds are seeing good trends in prices.”

As much as 40 percent of the crop in Minnesota, the fourth largest U.S. corn grower, may suffer reduced yields, Bob Zelenka, the executive director of the state’s Feed and Grain Association in St. Paul said last week.

Hedge-fund managers and other large speculators increased their net-long positions in Chicago corn futures in the week ended Sept. 21 to the highest since March 1996, according to U.S. Commodity Futures Trading Commission data.

Rising Bets

Speculative long positions, or bets prices will rise, outnumbered short positions by 465,714 contracts on the Chicago Board of Trade, the Washington-based commission said in its Commitments of Traders report. Net-long positions rose by 21,625 contracts, or 5 percent, from a week earlier.

Net-long positions in soybeans rose 16,681 contracts, or 11 percent to 163,087 in the week ended Sept. 21, the most since May 1997.

Soybean planting in Brazil’s Mato Grosso and Goias areas will likely be delayed until they get enough rain to replenish soil moisture, DTN said Sept. 24.

December-delivery wheat gained as much as 1.4 percent to $7.2975 a bushel on the Chicago Board of Trade, extending its 3.3 percent surge in the previous session.

To contact the reporter on this story: Luzi Ann Javier in Singapore at ljavier@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.ne

Wheat Gains for First Time in Three Days as Drought Slows Russian Planting

Wheat advanced for the first time in three sessions as grain plantings in Russia, the world’s third-largest wheat grower last season, lagged behind last year’s pace and recent declines lured buyers.

December-delivery wheat rallied as much 1.5 percent to $7.3775 a bushel on the Chicago Board of Trade, after slumping 2.5 percent in the past two days. The contract was at $7.3425 a bushel at 10:51 a.m. Singapore time.

Farmers in Russia have planted 5.8 million hectares (14.3 million acres) of grains so far this season, compared with 10.8 million hectares in the same period last year, the country’s Agriculture Ministry said yesterday.

“The Russian planting pace is slower than the market hoped,” Michael Pitts, a commodity sales director at National Australia Bank Ltd., said by phone from Sydney. “That’s providing some underlying support.”

The Russian wheat harvest was at 34.3 million tons from July 1 through Sept. 16, the ministry said, compared with the 48 million tons reported by the government in the same period last year. Yesterday’s harvest estimate by the ministry didn’t provide a comparison with the previous year.

Total grain harvests were 51 million tons as of yesterday, the ministry said. That compares with 77.4 million tons in the same period last season, according to the 2009 report.

Wheat declined in the past two days after rain improved soil moisture in the southern Great Plains as farmers prepare to plant winter crops in the U.S., the world’s largest exporter, and the Australian government forecast its wheat harvest to rise to 25.1 million tons, the third-biggest on record.

‘Bargain Hunters’

“There’s certainly been a range of buyers who are looking for a fall-off in the market,” Pitts said. “We’re certain to see bargain hunters out there.”

Prices have fallen 15 percent since trading at a 23-month high of $8.68 a bushel on Aug. 6, the day after Russia announced a ban on exports that was later extended through next year.

December delivery corn was unchanged at $4.9525 after gaining for the past five days. Corn futures have advanced 13 percent this month, outpacing wheat’s 7 percent advance, as investors boosted bets on price gains.

The U.S. Department of Agriculture has cut its estimates for U.S. and worldwide inventories every month since May, as drought or excessive rains in some of the world’s largest exporters slashed harvests of wheat and barley. To meet livestock-feed requirements, buyers may turn to the U.S., which accounts for more than half of global corn exports, according to USDA data.

That will take corn inventories in the U.S. before next year’s harvest to about 9.8 percent of domestic consumption, the lowest level in 15 years.

“There’s a very good fundamental story that hasn’t quite made a bit of a run, and that’s attracting investor interest” in corn, Pitts said.

November-delivery soybeans climbed as much as 0.4 percent to $10.465 a bushel, before trading at $10.4525. 

To contact the reporter on this story: Luzi Ann Javier in Singapore at ljavier@bloomberg.net

Wheat Falls as U.S. Agency Unexpectedly Raises Global-Inventory Forecast

Wheat prices fell for the third time this week after the U.S. government unexpectedly raised its forecast for global stockpiles and boosted Canada’s production outlook.

World inventories will total 177.8 million metric tons in the year ending May 31, the Department of Agriculture said in a report today. That’s up from last month’s estimate of 174.8 million tons and above the 171.1 million tons forecast by analysts surveyed by Bloomberg News. The grain has gained 36 percent this year on supply concerns.

“I have to go with these report numbers being bearish,” said Jason Britt, the president of Central States Commodities Inc. in Kansas City, Missouri. The increased forecast “is going to put the brakes on prices.”

Wheat futures for December delivery fell 1.25 cents, or 0.2 percent, to close at $7.3675 a bushel at 1:15 p.m. on the Chicago Board of Trade. The grain fell 0.6 percent this week.

Canada’s crop will be 22.5 million tons, up 9.8 percent from last month’s estimate, the USDA said. Last year, the U.S. was the largest shipper of wheat, followed by Canada, Russia, Australia and Ukraine, USDA data show.

Wheat is the fourth-biggest U.S. crop, valued at $10.6 billion in 2009, behind corn, soybeans and hay, government data show.

To contact the reporter on this story: Tony C. Dreibus in Chicago at tdreibus@bloomberg.net. 

Wheat Advances as Russia Extends Export Ban, FAO Calls Emergency Meeting

Russia’s government has forecast that this year’s harvest may be slashed by as much as 38 percent as the worst drought in at least half a century parched crops. Photographer: Alexander Zemlianichenko Jr/Bloomberg

Wheat climbed after Russia, the third-largest grower last year, extended a ban on exports into next year after a drought destroyed crops, tightening global supplies. The United Nations’ Food and Agriculture Organization called a special meeting to address the global grains situation.

The December-delivery contract gained as much as 0.8 percent to $7.1925 a bushel in Chicago, after surging as much as 2 percent yesterday when Prime Minister Vladimir Putin announced the extension. Russia accounted for 14 percent of the global exports of wheat, flour and related products in the year to June 30, according to the U.S. Department of Agriculture.

Russia’s longer ban may contribute to higher global prices, raising concern there may be a rerun of the 2008 food crisis, when grains reached records and riots broke out in poorer states. In Mozambique, at least seven people died this week in clashes between protesters and police after the government boosted bread and electricity prices. World food prices rose last month to the highest level since September 2008, the FAO has said.

“In the past few weeks, global cereal markets experienced a sudden surge in international wheat prices on concerns over wheat shortages,” the FAO said in a website statement, announcing the meeting for Sept. 24 in Rome. The gathering would allow importers and exporters to meet, it said.
Longer Ban

Russia will extend the ban on grain and flour exports at least until next year’s crop is harvested, Prime Minister Putin said yesterday. The initial ban, announced on Aug. 5, was implemented from Aug. 15 and had been set to lapse on Dec. 31. Its announcement drove wheat futures to $8.68 a bushel the next day, the highest price in 23 months.

The December contract on the Chicago Board of Trade was at $7.1875 a bushel at 12:35 p.m. in Singapore, taking the weekly gain to 3.4 percent. Wheat, which peaked at $13.495 a bushel in February 2008, has jumped 50 percent in the past year.

“We can only review lifting the ban on grain exports after the next year’s crop is harvested and we have clarity on the balances,” Putin said in a government meeting in Moscow yesterday. Extending the export restrictions will add “predictability” to the market, Putin said.

World wheat production will fall 5.1 percent to 646 million metric tons this year on the Russian drought, from 681 million tons in 2009, the Rome-based FAO said Sept. 1 as the agency also reduced the outlook for overall grains production. “Wheat markets remain tight but supplies are adequate,” the FAO said.

Global wheat stockpiles remain higher than during the 2008 surge in prices, according to FAO estimates. Worldwide inventories at the end of the 2010-2011 marketing year may total 181 million tons, equivalent to 27.2 percent of demand, compared with 144 million tons, or 22.3 percent, at the end of 2007-2008.
Mozambique Clashes

Residents of Maputo, Mozambique’s capital, continued a strike yesterday for a second day over higher food and utility prices. Protests began after the government announced plans to raise water and electricity rates by 30 percent from Sept. 1, and the price of bread by 25 percent on Sept. 6.

Russia’s government has forecast that this year’s harvest may be slashed by as much as 38 percent as the worst drought in at least half a century parched crops. The nation’s harvests are typically completed in November.

“The probability is getting much higher” that Russia’s next wheat crop may remain below average, keeping the nation out of the export market longer than expected, Tetsu Emori, a commodity fund manager at Astmax Co., said by phone from Tokyo today. “They need a good amount of rainfall” to replenish soil moisture to be able to sow the next crop, Emori said.

Franciscus Welirang, chairman of the Flour Mills Association in Indonesia, said last month there may be another food crisis if the surge in wheat sparked by Russia’s export ban drove other staples higher. Indonesia is Asia’s largest buyer of the grain. “It’s the end of cheap wheat,” Welirang said Aug. 6.
December-delivery corn was unchanged at $4.475 a bushel at 12:38 p.m. in Singapore. Soybeans for November delivery advanced 0.6 percent to $10.1475 a bushel.

To contact the reporter on this story: Luzi Ann Javier in Singapore at ljavier@bloomberg.net