Grains Oilseeds

[Tackler]

Massive cut in U.S. corn area to boost prices: panel
Mon Mar 31, 2008 10:22am EDT

By Sam Nelson

CHICAGO (Reuters) - A shocking reduction in U.S. corn acreage estimated by the U.S. Department of Agriculture on Monday will give corn prices a huge boost, possibly to record highs, a CME Group panel said.

A big rebound in estimated soybean and wheat area is expected to knock soybean and wheat futures prices sharply lower, the panel said.

"Very seldom do you see a report that would give you limit-up new-crop corn and limit-down new-crop beans, but this report certainly has that chance," said Don Roose, analyst and president of U.S. Commodities, Des Moines, Iowa.

USDA on Monday said U.S. farmers would plant 86 million acres of corn this year, down 8 percent from last year's 93.6 million -- the most in 60 years.

The government's planting estimate was below an average of analysts' estimates and also near the low end of a range of estimates.

Soaring corn prices early last year led farmers to plant corn at the expense of soy but a surge to record-high prices for soy early this year helped cause a big reversal of acreage plans.

USDA also said the supply of corn in the United States on March 1 totaled 6.859 billion bushels which was well below most estimates, adding further bullish momentum to the Chicago Board of Trade corn futures market.

"Corn certainly had a supportive planting number and the lower stocks suggest better feed usage and tightening corn stocks," said Terry Roggensack, owner and analyst for The Hightower Report.

"It's a double bullish setup for corn, with the lower acres and feed usage up ... also the hogs and pigs report on Friday was a good prelude of increased feeding and lower corn stocks," Roose said.

USDA on Friday said the U.S. hog herd was sharply above expectations, leading to outlooks for limit losses on Monday in Chicago Mercantile Exchange hog futures.

The panel also said even further shifts in corn/soy area were likely this year because of cold and wet weather across many key crop areas of the U.S. South and southern Midwest.

U.S. farmers always try to plant their corn crop early and before soybeans to achieve maximum yield potential, and the current soggy weather is preventing early spring field work.

"If you throw in a lot of rain in the Midwest that's slowing plantings, it's even more bullish for corn," Roggensack said.

Roggensack said his objective for CBOT December new-crop corn futures was $6.20 per bushel, above the close in Asian trade on Monday of $5.81-3/4 per bushel and above the contract high for that month of $5.90-3/4.

USDA forecast 2008 U.S. soybean seedings at 74.8 million acres, above an average of analysts' estimates for 71.7 million and a huge 17.5 percent increase from last year.

"The soy acreage number is big and suggests the crop could go back over 3.1 billion bushels," Roose said.

Because of the low soy acres last year, U.S. soy output totaled only 2.6 billion bushels, according to the USDA.

The analysts said U.S. and global corn supplies were likely to fall sharply and the stocks-to-usage ratio would plunge to a record low, indicating an extremely tight global supply of corn.

However, soybean supplies should increase and the wheat supply, while tight, should begin increasing ... assuming normal weather.

"Weather is the dominant factor and right now we have wet weather," Roose said, referring to the less-than-ideal spring planting conditions in the United States.

USDA said 2008 U.S. wheat area totaled 63.8 million acres, slightly above an average of analysts' estimates for 63.6 million and up from last year's 60.4 million. The supply of wheat in the United States on March 1 totaled 710 million bushels, up from an average of analysts' estimates for 666 million but below the 857 million on March 1, 2007.

Analysts said the bigger wheat numbers released by USDA would lead to pressure on global wheat prices.