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UPDATE 1-USDA lowers U.S. corn carryout, raises wheat stocks

Ros Krasny
Friday, 10 Jan 2014 | 1:14 PM ET

(Adds market reaction, analyst comments)

WASHINGTON, Jan 10 (Reuters) - U.S. quarterly corn stocks were below expectations after dry weather late in the growing season trimmed yields and feed use picked up, the U.S. Agricultural Department said on Friday in a report supportive to corn prices.

Chicago corn futures jumped by more than 3 percent on the report while soybeans pared gains and wheat fell by almost 3 percent to new contract lows as traders focused on rising U.S. and world stockpiles.

USDA also showed that recent falling prices caused farmers to turn away from wheat plantings in the U.S. Midwest.

Total winter wheat seeded area for 2014 was down 3 percent from a year ago at 41.9 million acres, with seedings of hard red winter wheat up and soft red winter wheat down sharply.

China has raised the ire of U.S. exporters by rejecting many cargoes of U.S. corn. On Friday, USDA raised China's 2013/14 corn crop by 6 million tonnes to 217 million, and knocked 2 million tonnes off projected imports to 5 million.

USDA's battery of reports carried few surprises for soybeans, where the bottom line - projected 2013/14 U.S. ending stocks - was unchanged but Brazil's crop was raised again.

Quarterly corn stocks are often one of the most market moving data points from USDA, but Friday's figure was hardly a blockbuster. As of Dec. 1, after the first quarter of the marketing year, the United States had 10.426 billion bushels of corn on hand, below market expectations averaging 10.790 billion but within the range of guesses.

USDA said the figure suggests corn usage in the Sep-Nov quarter of 4.32 billion bushels, up 15.5 percent on the year, as sharply lower prices drew out export and feed demand.

In its first crop forecasts in two months, USDA pegged the 2013 U.S. corn crop at 13.925 billion bushels, still a record high but below the average trade guess of 14.066 billion bushels. That confounded the corn market's recent expectation that big crops, generally, only get bigger.

Corn yields of 158.8 bushels per acre were down from 160.4 estimated in November and also lower than the trade forecast.

"The whisper going in here was the USDA could come up with a 163-164 (bushel per acre corn yield). The fact that it went down was particularly surprising to a lot of the traders ... you definitely caught the market leaning the wrong way," said Jim Gerlach of A/C Trading.

Soybean production at a record high 3.289 billion bushels, was up 1 percent from November but close to the average guess of 3.279 billion. Yields were left unchanged from November at 43.3 bushels per acre but harvested acreage was higher.

The USDA forecast 1.631 billion bushels of corn will remain on hand when the new crop is ready for harvest by late summer, roughly double the drought-affected level of a year ago but down from 1.792 billion projected in December. The stocks-to-use ratio for 2013/14 tightened to 12.4 percent from 13.7 percent forecast a month ago.

"The big buffer, the big cushion that we had is not as big as we had previously thought," said Don Roose, analyst at U.S. Commodities.

As debate rages about the fate of the ethanol industry given a possible cut to the Renewable Fuels Standard mandate for 2014, USDA raised its forecast of corn-for-ethanol usage by 50 million bushels, to 5 billion bushels, reflecting continued strong weekly production.

BIG DROP IN MIDWEST WHEAT SEEDING

Area seeded to soft red winter wheat, the variety traded in Chicago, fell 16 percent on the year to 8.44 million acres, with decreases seen in most states and especially in Arkansas and Mississippi, USDA said. By contrast, seedings of hard red winter wheat rose 2 percent to 30.1 million acres.

Large decreases in HRW wheat acreage were logged in Kansas, Oklahoma and South Dakota, while North Dakota growers seeded a record high area.

USDA noted that HRW wheat conditions by the end of November were improved from a year ago. It did not address the recent record cold snap in much of the wheat belt.

U.S. wheat disappearance for Sep-Nov was 407 million bushels, down 6 percent from a year ago, and Dec. 1 stocks were above the average trade guess at 1.463 billion bushels, pushing up projected 2013/14 ending stocks. USDA knocked down feed and residual usage for the year by 60 million bushels.

"The wheat negatives help neutralize the corn positives," said Roose.

Brazil will harvest a record 89 million tonnes of soybeans, up 1 million tonnes on the month. The South American powerhouse continues to vie for the title of "world's largest soybean grower." The United States, with a crop of 89.5 million tonnes, narrowly held the edge.

The U.S. soybean market is finding plenty of demand to absorb the record crop, USDA said. It raised exports and crush by a combined 30 million bushels from December. Ending stocks were steady at 150 million bushels, barely up from 141 million a year ago, showing little margin for error in the 2014 growing season.

CHINA'S CORN CROP UP, PROJECTED IMPORTS DOWN

The hike to China's corn crop reflected a revision by Chinese authorities and a review of growing-season weather, USDA said. "Recent rejections of U.S. corn shipments by China and larger domestic corn supplies in China are expected to limited imports," it added.

China's wheat crop was also raised, and world wheat carryout for 2013/14 rose. Higher imports were projected for Egypt, Japan and Syria, USDA said.

Global soybean stocks of 72.33 million for 2013/14 were higher than market expectations.

(Reporting by Ros Krasny, additional reporting by Mark Weinraub, Tom Polansek and Julie Ingwersen in Chicago; Editing by Chris Reese)