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GRAINS-Surge on shrinking US stocks, corn locked limit up

Published 03/31/2011, 01:26 PM
Updated 03/31/2011, 01:28 PM
BIG
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* Corn limit up, rises 4.5 percent on bullish USDA data

* Soybeans up 3 percent on lower stocks, acreage decline

* Wheat follows corn, soy higher despite bearish USDA data (Recasts, adds quotes, updates prices)

By Karl Plume

CHICAGO, March 31 (Reuters) - Grains surged on Thursday, with corn rallying 4.5 percent as strong demand whittled down stocks even as farmers geared up to plant the second-largest area since 1944.

Soybeans soared to a seven-week high after the U.S. Agriculture Department reported on Thursday lower-than-anticipated stocks and spring seedings that were below expectations.

Wheat rose 3.5 percent in light volume, following soaring corn and soybeans despite a bearish stocks estimate and a larger-than-expected jump in the USDA's spring wheat seedings forecast.

"The big number was USDA's corn stocks number, which is a reflection of demand and how much corn is moving into the marketing channel," said Jerry Gidel, analyst for North America Risk Management Inc.

"The number suggests feed demand has not declined as some had expected and it suggests ethanol production is staying very strong," he said.

Thursday's rally put a positive end on what has been the weakest quarter since mid-2010 as it looked like the surge in grains prices had topped out on expectations of large U.S. crops.

Chicago Board of Trade May corn futures rose the 30-cent daily limit at $6.93-1/4 per bushel as of 11:52 a.m. CDT (1652 GMT), the strongest gain in nearly two weeks. The contract was trading synthetically through options as high as $7.26 a bushel, according to traders, which would be a three-week high.

CBOT May soybeans rose 41 cents to $14.13 a bushel, a 3 percent gain that was the largest in two weeks, after earlier hitting a seven-week high of $14.32.

CBOT May wheat jumped 36-1/4 cents, or 5 percent, to a three-week high of $7.63-1/2 a bushel. It was the largest percentage gain in two-weeks.

Corn and soybean stocks were shrinking faster than anticipated despite prices near highs not seen since the record-setting rallies of 2008.

"We are not rationing demand yet," said Rich Nelson, director of research with consultancy Allendale Inc. "Extremely tight supplies are going to get even tighter."

"The trade is now wondering if new-crop (corn) stocks, which were going to be slightly higher than this year, may now only be equal to this year so people are suggesting new-crop futures need to be at $7 (a bushel)," he said.

The USDA has already forecast end-of-marketing-year corn stocks at the lowest level in 15 years, but Thursday's low quarterly stocks estimate hinted at an even tighter supply.

USDA pegged March 1 corn stocks at 6.523 billion bushels, below the range of trade estimates.

Corn and wheat were set to close lower for the month of March, while soybeans were in position to rebound from a February dip with a sixth month of gains in seven months.

BULLISH STOCKS TRUMP ACREAGE

Investors focused more on the USDA's bullish March 1 corn and soybean stocks estimates than on prospective plantings forecasts that were within the range of pre-report estimates.

Farmers may yet adjust the area devoted to each crop in coming weeks. Such changes will show up in the USDA's acreage report on June 30.

USDA pegged March 1 soybean stocks at 1.249 billion bushels, below the range of trade estimates.

USDA's eagerly awaited prospective plantings report on Thursday pegged corn seedings at 92.178 million acres and soybean plantings at 76.609 million acres, both within the range of pre-report estimates. (Additional reporting by Sam Nelson, Mark Weinraub and Michael Hirtzer; Editing by Lisa Shumaker)

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