Commodities Watch: Grain Supplies and Planting Plans Stir Up Equities; Rare Earths Get Some Congressional Attention (MOS, POT, AGU, CF, MOO, DBA, MON, KFT, TSN, CAG, SFD, MCP)

Time now for our daily look at commodity prices and news. Today’s news is dominated by two reports from the US Department of Agriculture. One provides the USDA’s latest figures on grain stocks, and the other offers details on planted acreage. The two reports have combined to set off a surge in ag commodities prices.

The anticipated demand for food is also boosting shares in most of the fertilizer companies today. Mosaic Co. (NYSE: MOS) reported solid profits today, but a revenue miss has weighed on the shares. Competitors Potash Corp. of Saskatchewan (NYSE: POT), Agrium Inc. (NYSE: AGU), CF Industries (NYSE: CF), the Market Vectors Agribusiness ETF (NYSE: MOO), and the PowerShares DB Agriculture ETF (NYSE: DBA) have all posted gains, while Monsanto Corp. (NYSE: MON) is trading down. The good news for fertilizer makers comes from the USDA report on planting.

Farmers are taking advantage of higher prices for grains to plant more acres in corn and wheat. Acreage planted in corn is expected to rise 5%, from 88.2 million acres last year to 92.2 million acres this year. That’s the second-highest level of corn planting in the US since 1944, trailing only the 93.5 million acres planted in 2007. Wheat acreage is up 8%, from 53.6 million acres to 58 million acres. Cotton acreage is up 15% above last year, from 11 million acres to 12.6 million acres.

Food manufacturers are not sharing in the market uptick, though. Kraft Foods Inc. (NYSE: KFT), Tyson Foods Inc. (NYSE: TSN), ConAgra Foods, Inc. (NYSE: CAG) and Smithfield Foods Inc. (NYSE: SFD) are all trading down on expectations of higher costs for grains and other food stocks.

Corn stocks are down 15% year-over-year, from 7.7 billion bushels in March 2010 to 6.5 billion bushels this year. Wheat stocks are up about 5% over last year, from 1.36 billion bushels to 1.42 billion bushels. Oats, sorghum, barley, and soybean stocks are also lower this year.

Demand for corn as a feedstock for ethanol could climb to 4.95 million bushels in the 2010-11 crop year, about 40% of the total crop. Expected increases in ethanol production in 2011 will prop up demand, and prices, for corn.

There’s not much margin for error either. The relatively low corn stock levels means that any hit to this year’s crops could really send prices through the roof. Corn futures are up the maximum-allowed $0.30/bushel today, to just below $7/bushel. Kansas City wheat futures are up nearly $0.50 to $9.21/bushel and Chicago wheat is up about 6%, to $7.71/bushel.

US Congressman Hank Johnson of Georgia has introduced a bill directing the US Geological Survey to conduct a three-year, comprehensive global assessment of rare earth elements. Now this might be a good idea, but it might also be an idea whose time has passed. Geologists already know most places where rare earth elements can be found (almost everywhere) and in what concentrations (very scarce). Mineable concentrations of the rare earths are, well, rare. The chances are minuscule that the USGS or another country’s geological survey will find a huge new deposit of the stuff that will break China’s current stranglehold on global supply.  Molycorp, Inc. (NYSE: MCP) has been a monster beneficiary of China’s rare earth move as it has what is (and will be) the only active rare earth large-scale mining project in America.

Gold and crude oil are both higher today on a weaker US dollar and new worries about the fighting in Libya. Gold rose to near $1,440/ounce earlier in the day, and WTI crude is up more than $2/barrel, to $106.40.

Paul Ausick