More bullishness for sugar and soybeans, less for corn

by Ron Sterk
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KANSAS CITY — Last week’s quarterly Grain Stocks and annual Acreage reports provided generally bullish signals to the sugar and soybean markets but somewhat bearish news for corn.

The nearby domestic sugar 14 futures contract in New York shot up about 2c a lb following the June 30 reports, to its highest level on a continuous basis since early 2006. The entire soy complex (soybeans, meal and oil) also soared, but corn traded down its 30c-a-bu daily limit the day of the reports, although prices regained some of the losses at midweek.

Midwest beet sugar prices climbed to 35c a lb, f.o.b. in late June then shot to 40c last week, which was the highest price since the post Katrina shortage in late 2005.

A combination of factors, including an explosion at a Georgia cane refinery, concerns about a smaller and late planted beet crop, record high corn prices, a lack of much impact from imported Mexican sugar, a force majeure on regular corn syrup shipments from a northeast Iowa plant due to flooding, and recent news of the eventual shutdown of one of the nation’s largest cane refineries to save the Everglades, all worked to pull sugar prices from what had been months of stability until early February.

The Acreage report, which showed beet plantings at 1.08 million acres, down 15% from 2007, and area intended for harvest at 1.03 million acres, down 18%, confirmed earlier speculation about planted area giving way to other, more profitable crops. It would be the fewest planted and harvested sugar beet acres since 1982, according to U.S.D.A. data.

Soybean plantings, on the other hand, although down slightly from March indications were up 17% from 2007 at 74.5 million acres, which is the third largest planted area ever and only 1% less than the record large area of 2006, the U.S.D.A. said. Harvested area was forecast at 72.1 million acres, up 15% from 2007 as weather-delayed plantings and flooding was expected to increase abandoned acres this year.

Soybean futures traded to new record highs well above $16 a bu last week.

Coming into play in the soybean market was the Grain Stocks report, which showed June 1 soybean stocks at 676 million bus, down 38% from the same date a year ago, and March-May disappearance at 758 million bus, up 9%. Soybean disappearance in the June-August period last year was 518 million bus. A similar volume of use during the June-August period this year would bring Sept. 1 stocks down to 158 million bus. If the pace of use carries over from the previous quarter at 9% more than last year, stocks could be near 111 million bus. In its June 10 supply-demand report, the U.S.D.A. forecast stocks at 125 million bus on Sept. 1, which is the beginning of the 2008-09 marketing year for soybeans.

Additional concern about tight soybean supplies this summer stems from the slower developing new crop, which was planted late or replanted because of wet, cool weather most of the spring. New crop supplies this fall may be available later than normal in the major Midwest states.

"Emergence delays followed planting delays, which resulted from excessive moisture throughout the nation’s mid-section," the U.S.D.A. said.

While corn also was developing later than average for the same reasons as soybeans in the major Midwestern states, the June 30 data pulled corn futures sharply lower early last week. Still, most corn futures contracts held well above $7 a bu and were double year-ago values.

Corn’s run-up to record high levels in late June and the prospect of potential sharp gains in corn sweetener prices for 2009 contributed to stronger sugar prices in June as some in the industry hinted at increased substitution of corn sweeteners with sugar.

The Grain Stocks report showed June 1 corn stocks at 4,028 million bus, up 14% from a year earlier, and disappearance in the March-May period at 2,831 million bus, up 12% from the same period last year. The Acreage report estimated 2008 corn plantings at 87.3 million acres, down 7% from 2007, but up 1.5% from March intentions, indicating farmers added corn acres even with the weather problems.

"Despite the decrease (from 2007), planted acreage is the second highest since 1946, behind last year, as high prices continue to provide incentive to plant corn," the U.S.D.A. said.

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