WASHINGTON - Lower prices created resurgent demand for U.S. corn at home and abroad, including in the ethanol market, the U.S. government forecast on Tuesday, resulting in smaller, but still ample, stocks at the end of this marketing year.
U.S. soybean stocks for 2013/14 were forecast down sharply from a month ago, but projected wheat stocks in the United States and globally were higher, largely reflecting a record crop in Canada, the U.S. Department of Agriculture said.
Chicago wheat futures fell about 1.5 percent to contract lows on the report, with corn down about 0.4 percent and soybeans nearly flat.
"There was nothing bullish in the report to lift the market," said Bob Utterback of Utterback Marketing, New Richmond, Indiana.
Global wheat supplies are up 32 million tonnes on the year and just 9 million tonnes short of a record high. USDA followed suit after Statistics Canada raised its latest crop forecast. Projected Australian wheat production also rose.
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"We don't live in a vacuum," said Roy Huckabay, analyst with The Linn Group. "The story here is that the rest of the world has a lot of grain even if the U.S. doesn't. What jumps out is that USDA took imports up in wheat, soybeans and corn."
USDA pegged world wheat ending stocks at 182.8 million tonnes, a two-year high that is up 4 million tonnes from November and 2 percent larger than traders expected. U.S. wheat carryout was also raised, based in expectations for bigger imports from Canada, and projected farm prices trimmed.
"Canada has got a lot of wheat, Australia has got a lot of wheat. That really does contain the upside," said Sterling Smith, futures specialist at Citigroup.
ROBUST U.S. CORN DEMAND
The Agriculture Department said the record-large U.S. corn supply in 2013/14 would dwindle to 1.792 billion bushels at the end of the marketing year, 4 percent less than traders had expected.
Still, it would be the largest stockpile in eight years and a resounding recovery from three years of disappointing harvests and razor-thin supplies. Compared to last season, corn use would be up nearly 2 billion bushels or 17 percent.
"I think the short-term destiny of the corn really is in the hands of the wheat," said Mike Zuzolo of Global Commodity Analytics.
Corn exports are projected to double from the previous marketing year and corn used for the ethanol industry would rise by 6 percent, said USDA, citing "the strong pace of weekly ethanol production since mid-October."
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The Environmental Protection Agency will decide in coming weeks whether to relax the federal mandate to mix biofuels into the gasoline supply. Its preliminary proposal is to lower the mandate below levels suggested by the 2007 law.
"I'm a little surprised by the ethanol number on corn - they raised ethanol by 50 million bushels even though we have considerations for a lower RFS (Renewable Fuel Standard)," said Rich Nelson, analyst at Allendale Inc.
With record crops in Canada and the United States, corn exports will rise worldwide and 2013/14 end stocks will be 1.9 million tonnes lower than forecast a month ago and 0.8 million tonnes less than traders expected.
U.S. soybean stockpiles will shrink to 150 million bushels at the end of this marketing year, down 20 million from the November estimate, due to larger crush and exports.
That would represent a two-and-a-half-week supply, underlining the need for another big crop next year. USDA raised its 2013/14 average farm price for soybeans to $12.50 per bushel from $12.15 last month.
"The question on my mind now is what the production numbers will do next month," Scott Davis, president of Bullpen Trading in Rochester, Minnesota, said of the big January USDA crop report.
"It is generally thought in the trade that the Chinese buying binge is about to end. But if it continues over the next few weeks, we'll have to reexamine that concern over soybeans supply," Davis said.
(Reporting by Charles Abbott in Washington; additional reporting by Michael Hirtzer, Thomas Polansek, Mark Weinraub and Christine Stebbins in Chicago; Editing by Ros Krasny and Bob Burgdorfer)
