CHICAGO – Grain prices soared on Monday after the U.S. Agriculture Department jolted the world market by shrinking its estimates of last year’s U.S. crops and its projections for 2004 world grain stockpiles.

In other commodity markets, crude oil prices traded at the highest level since the Iraq war. And a bounce in the weak U.S. dollar prompted some profit taking in gold and copper, but silver bucked that trend to reach a new 6-1/2 year high.

At the Chicago Board of Trade, prices for corn, wheat and soybeans soared from the opening bell in reaction to surprising reports issued by the USDA.

“Needless to say, about everything was a surprise, and it was a bullish report,” said Joe Victor, manager of marketing for Allendale Inc. “The world stocks jump out at us, especially the 7-million-ton reduction in world corn stocks.”

USDA said there was not as much corn produced in the United States during 2003 as it had previously estimated, while demand stayed strong. This resulted in a cut in USDA’s projection for world corn stocks this year to 67.5 million metric tons, from 74.3 million forecast in December and 130 million two years ago.

CBOT March corn closed 14-1/2 cents higher at $2.65-1/2 a bushel, the highest close since September, 2002.

“The report tells me that if you look at stocks-to-use … there should be $2.75 on March corn,” said Dale Gustafson, grain market analyst for Citigroup.

“We continue to see tighter stocks worldwide and in the United States,” said Doane Agricultural Services President Dick Loewy. “World corn stocks are the lowest in 25 years.”

World wheat stocks were trimmed about 700,000 tons from last month at 127.66 million, compared with 201 million two years ago. But the USDA shocked traders by also trimming estimated seedings of winter wheat last fall by U.S. farmers.

USDA put winter wheat seedings at only 43.464 million acres, below the average analyst estimate of 45.637 million.

“The noose continues to tighten and wheat prices certainly could move back over $4.00 per bushel this year and we certainly have put the lows in on corn,” Loewy said.

CBOT March wheat closed 13-3/4 cents a bushel higher at $3.99-1/4, hovering just below 14-month highs.

World oilseed stocks remain comfortable because of rising output in South America. But in the United States, USDA projected soybean end-season stocks before harvest next September will fall to 125 million bushels — a 27-year low.

“The world balance sheet on soy is good, there are ample stocks. The problem is here in the U.S.,” Loewy said. “At the rate we’re going (in soy crush and exports), we’ll certainly run out of beans in May.”

At the New York Mercantile Exchange, crude oil hit a 10-month high as concerns about low U.S. inventories offset profit-taking as the U.S. Northeast thawed out from a freeze.

NYMEX February crude closed 41 cents higher at $34.72 a barrel, trading at the highest level since March 18. In London, February Brent North Sea crude rose 39 cents at $31.76.

“It’s still a pretty firm market despite the natural gas weakness,” said Refco analyst Marshall Steeves. “Crude supplies remain quite tight.”

NYMEX February natural gas fell 38.1 cents at $6.906 per million British thermal units. Temperatures in the Northeast, the largest heating oil user, were forecast to rise to above normal levels on Tuesday, then settle back below normal this week.

NYMEX February heating oil fell 0.19 cent at $1.0077 a gallon. February gasoline fell 0.75 cent at $1.0162 a gallon.

Copyright 2004, Reuters News Service