Agriculture stocks jump ahead of USDA crop reports
October 12, 2011
SAN FRANCISCO (MarketWatch) — Agriculture stocks jumped on a broad rally in grain futures Tuesday, ahead of key crop reports from the U.S. Department of Agriculture on Wednesday morning.
December corn C1Z +0.62% closed Tuesday's session at its daily price move limit, up 40 cents, or 6.6%, at $6.45 a bushel on the Chicago Board of Trade. November soybeans S1X -0.18% settled up 58 cents, or 4.9%, to $12.36 a bushel while December wheat W1Z -0.30% added 49 cents, or 8.1%, to close at $6.61 a bushel.
Credit Suisse Group AG also raised its fertilizer price outlook in a research note Tuesday, citing robust grain prices, tight supply and strong demand from emerging markets.
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Fertilizer companies were some of the top gainers in the S&P 500 on Tuesday. Shares of CF Industries Holdings Inc. CF -0.48% picked up 4.6%, with shares of Mosaic Co. MOS +0.11% adding 4.3%. Shares of agricultural machinery manufacturer Deere & Co. DE -0.25% rose 3.3%.
The grain futures rally also lifted Canadian agriculture companies. Toronto-listed shares of Potash Corp. of Saskatchewan CA:POT +6.66% POT +0.13% , the world's largest fertilizer producer, soared 6.7% while shares of fellow fertilizer maker Agrium Inc. CA:AGU +6.80% AGU +0.26% jumped 6.8%.
The USDA Crop Production and World Agricultural Supply and Demand Estimates (WASDE) reports are issued every month and provide U.S. and global crop forecasts.
The report on crop production is expected to show a lower forecast for U.S. corn production, with estimates from futures brokerage PFGBEST pointing to a decline to 12.395 billion bushels from the 12.5 billion in September's USDA forecast.
U.S. corn ending stock forecasts in the WASDE report are expected to rise to 730 million bushels, up from September's estimate of 672 million bushels.
"The common thinking is that the government will reduce corn usage to the point that it will offset any drop in production," said Tim Hannagan, senior grain markets analyst at PFGBEST, noting that the lower production forecast is due to unusually hot and dry weather in July.
Since soybeans are planted later than corn and survived the hot July, the soybean forecast is expected to be slightly higher, Hannagan said.
Estimates on the soybean production forecast stand at 3.095 billion bushels, according to PFGBEST. That's up from September's USDA estimate of 3.09 billion bushels
By Nicole Hong, MarketWatch
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