Bushel of corn streaks past $7

Drought, feed use cut inventory 17%

— Corn prices surged Friday, capping the biggest weekly rally since July, after the government said stockpiles in the U.S., the world’s largest grower and exporter, shrank more than analysts expected because of a drought-reduced harvest and rising demand for livestock feed.

Inventories on Dec. 1 were 8.03 billion bushels, 17 percent less than the 9.647 billion held a year ago, the U.S. Department of Agriculture said in a report. Supplies held in farmer grain bins fell 26 percent from a year earlier to the smallest for that time of year since 1995. The USDA said meat and poultry production will be 1.4 percent larger than forecast in December.

Corn production tumbled 13 percent last year after the worst drought since the 1930s damaged crops across the Midwest. After corn futures rallied as much as 68 percent since mid-June to a record in August, prices have slipped as the outlook for global supply improved and demand slowed. Tighter supplies than forecast may push costs higher for ethanol producers including Poet LLC, and meat companies including Smithfield Foods Inc. and Sanderson Farms Inc. that feed the grain to livestock.

“Supplies are tight, and the market’s job is to rally to slow down usage,” said Don Roose, the president of U.S. Commodities Inc. in West Des Moines, Iowa. “Now the attention shifts to prevailing drought conditions in the western Midwest and the upcoming planting season.”

Arkansas’ 2012 corn crop, helped by earlier-than usual planting and irrigated fields, was expected to reach a record 122 million bushels, with an average yield of 177 bushels per acre, also a record, the National Agricultural Statistics Service reported in October. The agency estimated growers harvested 690,000 acres of corn — about onethird more than in 2011.

Corn futures for March delivery advanced 1.4 percent to settle Friday at $7.0875 a bushel on the Chicago Board of Trade, the biggest gain since Dec. 14. Prices rose 4.2 percent over five straight days, the first weekly rally since Nov. 30 and the biggest since July 20. Before the report, the contract tumbled as much as 1.8 percent.

The harvest of corn, the nation’s biggest crop, totaled 10.78 billion bushels, the USDA said in a separate report Friday. While that’s up from 10.725 billion estimated in December, it’s down from 12.36 billion collected in 2011 and the lowest in six years. Analysts expected 10.65 billion bushels, on average.

Consumption in the three months through November was 3.74 billion bushels, down from 3.843 billion a year earlier. Exports will total 950 million bushels in the marketing year that began Sept. 1, according to the report. That compares with 1.15 billion forecast in December and 1.543 billion in the previous year.

An estimated 4.5 billion bushels will be used to produce ethanol, unchanged from the December forecast and down from 5.011 billion in the previous year, the USDA said. Feed demand will total 4.45 billion bushels, up from 4.15 billion projected a month ago and less than 4.548 billion a year earlier, the agency said.

Inventories before the 2013 harvest will total 602 million bushels, compared with 647 million estimated in December and 989 million at the start of this marketing year, the USDA said.

Cash corn prices in the current marketing year will average $7.40 a bushel, unchanged from the month-ago estimate and up from $6.22 last year, according to the government.

World output in the crop year that began Oct. 1 will be 852.3 million tons, up from 849.09 million forecast last month and down from 883.54 million the previous year, the USDA said.

Global consumption is forecast to fall for the first time since 1996 to 868.11 million tons from 879.24 million last year.

Worldwide inventories at the end of the marketing year will be 115.99 million tons, down from 117.61 million predicted in December, on increased demand for livestock feed, the USDA said. The year-earlier figure was 131.79 million.

Business, Pages 27 on 01/12/2013

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