Yesterday the U.S. Department of Agriculture (USDA) cut forecasts for crop stocks. The CME (NYSE:CME) states:
“This morning’s USDA data provided lots of bullish news as nearly every figure came in below traders’ expectations.”
Corn and soybeans bolted to 30-month highs as final estimates of the 2010 crop were 12.447 billion bushels, down from 12.54 billion (December) and down from a revised 13.092 billion in 2009.
The USDA warned global stocks-to-demand would fall to “levels unseen since the mid-1970s.” This leaves no buffer for unforeseen weather problems.
Potash (NYSE:POT), Mosaic (NYSE:MOS), Archer Daniels Midland (NYSE:ADM), Deere (NYSE:DE), and Bunge (NYSE:BG) all benefited from the news. ETFs to consider are Market Vectors Agribusiness (NYSE:MOO), PowerShares DB Agriculture Fund (NYSE:DBA), and Rogers Intl Commodity Index – Agriculture Total Return ETN (NYSE:RJA).
Food producers and wholesalers will now have increased costs. Some will be passed on to the consumer, others will negatively impact the bottom line: Coke (NYSE:KO), PepsiCo (NYSE:PEP), Nestle (PINK:NSRGY), General Mills, Inc. (NYSE:GIS), Kellogg Company (NYSE:K), and Kraft (NYSE:KFT).