In USDA's ending stocks report, corn and soybean supplies were down more than expected, which sent prices to record highs.
USDA’s January crop reports were full of surprises. Among those, USDA estimated winter wheat plantings at 46.6 million acres planted last fall, down from the analysts' expectations of 48.6 million.
That same survey, conducted in late November and early December, showed that corn yields were lower than previous estimates. On the corn side, USDA's report reflects lower corn yield than previously estimated, dropping 2007 corn yields to 151.1 bushels per acre nationwide.
Dec. 1, corn stocks were much lower than the market anticipated, as USDA confirmed in its quarterly stocks report. Fall feed usage came in higher than predicted, which combined with lower production and greater demand caused USDA to cut its Sept. 1, carryout estimate by more than 350 million bushels. The futures markets rallied its 20-cent trading limit, pushing December 2008 corn beyond $5 a bushel.
On the soybean side, USDA trimmed its forecast of Sept. 1, soybean carryout to 175 million bushels, causing the March futures to rally past $13 a bushel.
The strong futures' rally has widened the gap (the basis) between futures and cash prices.
No question, the market is putting the wheels in motion for crops to battle to "buy acres." Now, the market will turn its attention to USDA's March planting intentions report, where surprises will mean more volatility.