U.S. corn futures climbed an expanded daily limit Friday as unexpected demand from China renewed concerns about low supplies.
Corn jumped 45 cents, the most allowed by the Chicago Board of Trade, in the first two contract months before paring gains. The most actively traded May contract closed up 37 cents, or 5.7%, at $6.83 1/2 a bushel. It was the second consecutive day the market touched the daily limit, pushing prices up 11% from Wednesday's close.
Futures soared as an employee of an international trade service agency said China purchased corn from the U.S. on Thursday and may make further purchases this year. The deals caught U.S. grain traders by surprise as high prices had reduced expectations for purchases by China.
"It's psychologically a big deal for right now," said John Kleist, senior analyst at ebottrading.com, an agricultural research and brokerage firm.
The market is sensitive to increased demand after rallying to a 32-month high March 4 on concerns about supplies, which are projected to drop to a 15-year low this year. The U.S. is the world's top corn producer and exporter.
Chatter about China re-emerged when the U.S. Department of Agriculture on Thursday reported private exporters struck deals to sell 116,000 metric tons of corn for delivery to unknown destinations during the 2010-2011 marketing year. Traders said China may have entered the market because prices had pulled back significantly since reaching the recent high.
South Korea took advantage of the price break, contracting purchases for at least eight cargoes of corn totaling 455,000 tons this week, a Seoul-based grains broker said Friday.
"The end users, whether they're domestic or international, said, 'I've got to start buying this stuff,'" said Alan Brugler, president of Brugler Marketing & Management, a brokerage firm in Nebraska.
Private analytical firm Informa Economics gave futures an extra boost by projecting U.S. corn plantings at 91.8 million acres, below the USDA's recent forecast for 92 million. Grain users are on edge about how much corn will be sown because of the need to replenish supplies. Informa's forecast raised concerns federal forecasters will lower their planting forecast in a crop report due March 31.
Informa pegged soybean plantings at 75.3 million acres, below USDA's forecast for 78 million acres. Soybean acreage in the corn belt will be down from 2010 in all states, except Kansas, as farmers increase corn plantings, the firm predicted.
"The Informa number was a big boost to soy futures, taking it from the weak link in the grain complex to a leader," said Mike Zuzolo, president of Global Commodity Analytics & Consulting, a brokerage firm in Indiana.
Soybeans for May delivery closed up 27 1/4 cents, or 2%, to $13.62 1/2 a bushel. Soft red winter wheat for May delivery rose 12 3/4 cents, or 1.8%, to $7.23.
Rice futures rose with the rest of the grain markets, with the May contract gaining 2.8% to $13.63 1/2 per hundredweight. Informa predicted farmers will plant rice on 3.2 million acres, down 431,000 acres from last year but up 320,000 from the firm's January estimate.
Ethanol for May delivery jumped 3.4% to $2.483 per gallon as corn rallied. Oats for May delivery surged 5.1% to $3.52 a bushel as the market recovered from a seven-month low Wednesday.
Soy product futures strengthened with soybeans. CBOT May soyoil settled 2.3% higher at 55.77 cents per pound, while CBOT May soymeal finished up 2.6% at a two-week high of $367.90 per short ton.
At the Kansas City Board of Trade, hard red winter wheat for May delivery rose 1.7% to $8.45 a bushel. Hard red spring wheat for May delivery was up 1.5% at $8.67 1/2.