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USDA Jolts Markets With Corn Numbers

The U. S. government roiled the grain markets June 30 with a sharp cut in corn acres and much tighter June 1 stockpiles, sending corn prices sharply higher and providing a short-term floor for the beaten-down market.

Despite predictions for a modest increase in acres planted to corn this year, the U. S. Agriculture Department’s survey of 88,000 growers found farmers had planted 87.872 million acres of corn, down from its previous estimate of 88.798 million acres in March.

“This is a shot across the bow and is astonishing given the fact farmers like to plant corn,” said Greg Wagner, an independent analyst.

An upturn in exports and increased livestock and ethanol demand left corn stocks as of June 1 at 4.31 billion bushels, USDA said. It was the highest level for the quarter since 2006, but six per cent less than traders had expected.

Veteran analyst Rich Feltes of MF Global

Research told clients it was “the largest trade overestimation of June 1 stocks in our database since … 1996.” USDA may have overestimated last year’s crop, or the poor quality of the crop may have meant livestock had to consume more than usual, he said.

Shrinking supply ideas could revive the debate about using corn for ethanol if the Obama administration moves forward on a request to allow more of the corn-based additive in gasoline, Feltes said.

The data sent corn prices surging.

Any weather threats could give more lift to grain prices, meaning meat processors such as Tyson Foods Inc. and Smithfield Foods Inc. and ethanol producers like Archer Daniels Midland Co. may face higher prices, said Mark McMinimy at Concept Capital’s Washington Research Group.

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