Bloomberg News

Corn Extends Worst Monthly Loss Since 2008 on Acreage Increase

July 01, 2011

July 1 (Bloomberg) -- Corn fell for a third day in Chicago, extending the biggest monthly drop since October 2008, after the U.S. reported acreage and inventories that topped analyst’s estimates. Wheat reached an 11-month low.

U.S. farmers planted 92.282 million acres of corn this year, 1.8 percent more than projected by analysts in a Bloomberg News survey and the second-highest since 1944, the Department of Agriculture said yesterday. Stockpiles as of June 1 were 3.67 billion bushels, 12 percent higher than forecast.

Increased grain supplies may ease global food-inflation concerns after prices measured by the United Nations climbed to a record in February. Tyson Foods Inc., the biggest U.S. meat processor, estimates the increase in corn and soybean costs is approaching $500 million from a year ago, James V. Lochner, chief operating officer, said May 9.

“In recent seasons, the USDA has surprised the market on a number of occasions with its data releases and today’s revisions to its planted area and quarterly grain stocks estimates in the grains markets were no exception,” Rabobank International said in a report dated yesterday.

Corn for December delivery slumped 31.5 cents, or 5.1 percent, to $5.89 a bushel by 11:10 a.m. London time on the Chicago Board of Trade. Prices reached $5.815, the lowest for the most-active contract since Dec. 16. The grain is up 53 percent in the past year.

More Sowing

“We’ve started to see a production response,” Michael Creed, an agribusiness economist at National Australia Bank Ltd., said by phone from Melbourne today. “Prices will subside when the crops are off.”

Farmers boosted corn seeding even as wet weather delayed fieldwork from Ohio to North Dakota. Prices rose to a record $7.9975 a bushel on June 10, spurring growers to plant through the month instead of switching to soybeans, which have a shorter season. Corn sowing typically is finished in May.

“The market is now faced with an additional 300 million bushels of corn to factor into prices,” Rabobank analysts led by London-based Luke Chandler said in an e-mailed report.

Worldwide wheat and corn harvests will be bigger than expected because of an improving outlook in the U.S. and China, the International Grains Council said yesterday.

While the USDA reports are bearish for the grain market, the agency may lower its estimates on U.S. acreage and stockpiles in its next report, according to Rabobank.

Acreage Revision

The USDA said it plans to survey farmers in Montana, Minnesota and North and South Dakota on acreage planted for corn, soybeans and durum and spring wheat because a large percentage of the acres remained to be sown when the latest survey was conducted in the first half of June. A revision in acreage may be released on Aug. 11, it said.

The rally in corn prices has yet to end, David Stroud, chief executive officer of New York-based hedge fund TS Capital Partners, said in an e-mail today.

“Incomplete crop reports coming out of the U.S., unpredictable weather worldwide, consumption at historical highs and tight supplies will cause corn prices to move back up by year end,” Stroud said.

Wheat for September delivery gained 2.25 cents, or 0.4 percent, to $6.165 a bushel, erasing a drop of as much as 3.6 percent. The most-active contract reached $5.92, the lowest level since July 28, 2010. Prices are up 23 percent in the past year.

Wheat Stockpiles

Farmers planted 13.627 million acres of spring wheat, 2.6 percent above estimates by analysts, the USDA said. U.S. inventories as of June 1 totaled 861 million bushels, topping forecasts by 4.6 percent.

Milling wheat for November delivery traded on NYSE Liffe in Paris advanced 3.50 euros, or 1.9 percent, to 188 euros ($273) a metric ton.

Soybeans for November delivery gained 12 cents, or 0.9 percent, to $13.06 a bushel in Chicago. The oilseed climbed 44 percent in the past year.

Planting of soybeans dropped to 75.208 million acres, less than analysts expected and below the 76.609 million estimated in March, as farmers switched to corn, the USDA said. Stockpiles as of June 1 were 619 million bushels, 4.6 percent more than forecast and above year-earlier supplies.

Rice for September delivery advanced 13 cents, or 0.9 percent, to $14.975 per 100 pounds after reaching $15.13, the highest price since June 9. The grain climbed 51 percent in the past year.

U.S. rice planting totaled 2.676 million acres, down 26 percent from a year earlier, the government said yesterday.

Wheat dropped 20 percent in the second quarter in Chicago, corn fell 10 percent, soybeans declined 8.2 percent and rice gained 6.1 percent. Wheat tumbled 21 percent in June, corn slid 17 percent, soybeans dropped 6 percent and rice slipped 1.4 percent.

The U.S. Federal Reserve’s second round of quantitative easing, also known as QE2, ended yesterday.

--With assistance from Jeff Wilson and Whitney McFerron in Chicago. Editors: Dan Weeks, John Deane.

To contact the reporters on this story: Tony C. Dreibus in London at tdreibus@bloomberg.net; Luzi Ann Javier in Singapore at ljavier@bloomberg.net.

To contact the editors responsible for this story: James Poole at jpoole4@bloomberg.net; Claudia Carpenter at ccarpenter2@bloomberg.net


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