Easing Corn Glut Bucks Goldman View Amid Biggest Rally Since ’13

30 Jun 2015 | Author: | No comments yet »

Corn Jumps Most Since ’13 as Shrinking Glut Blunts Goldman View.

American farmers planted fewer acres with the grain than estimated three months ago, and domestic stockpiles as of June 1 were smaller than analysts were forecasting, a report from the U.S. Prices haven’t settled above $4 since mid-January. “Traders are factoring in reduced yields due to weather, so reduced acreage is almost a double whammy for corn markets,” Sal Gilbertie, president and chief investment officer at Teucrium Trading LLC told MarketWatch.

Signs that excess supplies are starting to get absorbed undermine a view from banks including Goldman Sachs Group Inc. that a surprise rally in June will be short-lived. The Bloomberg Agriculture Index of eight farm products is heading for the biggest monthly gain since February 2014, and investors have been snapping up holdings of exchange-traded funds tracking farm goods. Corn and wheat erased their 2015 losses on Tuesday. “The USDA data was a bullish surprise for markets that were already on a rally and needed additional news to keep running,” Don Roose, the president of U.S. Overall, the grain markets have reacted positively to the USDA data “because stocks and plantings were below expectations for corn and soybeans, while the wheat markets are weather driven right now,” said Gilbertie. Sept. wheat WU5, +3.04% tacked on 12 1/2 cents, or 2.1%, to $5.96 a bushel, while Nov. soybeans SX5, +4.44% added 43 cents, or 4.4%, to $10.23 a bushel.

Corn, the nation’s biggest crop, was sowed on 88.9 million acres compared with a March 31 projection of 89.2 million, the USDA said Tuesday in a report released in Washington. All wheat planted for 2015 was estimated at 56.1 million acres—down 1% from last year, while stocks totaled 753 million bushels on June 1, up 28% from a year ago. “It’s too wet in the United States and too dry in Canada and parts of Europe, which is creating quality issues across global wheat markets,” said Gilbertie. “Clearly, the report has not dampened recent investor beliefs that grain markets may potentially be finding support after a multiyear bear market due to near-perfect weather patterns in 2013 and 2014,” he said. The government’s report “challenges our bearish stance on soybeans, at least in the short term as the market adjusts to new crop-production forecasts,” Christopher Narayanan, the New York-based head of agricultural research for Societe Generale SA, said in an e-mailed note.

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