Bloomberg News

Corn Extends Declines After Biggest Monthly Drop in Five Decades

October 03, 2011

Oct. 3 (Bloomberg) -- Corn fell, adding to its biggest monthly drop in at least five decades, after a report showing larger-than-expected supplies in the U.S., the largest shipper, signaled slower demand for grain used in animal feed and fuel.

Corn for December delivery declined as much as 1.9 percent to $5.8125 a bushel on the Chicago Board of Trade, the lowest price since July 1, and was at $5.8175 at 10:45 a.m. Paris time. Prices slumped 23 percent in September, the biggest monthly slide in records going back to 1959.

U.S. supplies of corn were an estimated 1.128 billion bushels on Sept. 1, the Department of Agriculture said Sept. 30, about 20 percent more than the average prediction of 24 analysts in a Bloomberg survey. Consumption in the U.S. fell 2.3 percent from a year earlier to 2.54 billion bushels in the three months ended Aug. 31 after prices rallied to a three-year high in June on adverse weather concerns, weighing on demand.

“Is demand weakening, that’s the underlying question raised by the numbers in the USDA report,” Paris-based farm adviser Agritel wrote in an online comment. “The start of the week remains marked by the uncertainty weighing on the state of the global economy.”

The USDA number for corn inventories raises the stocks-to- use ration to 7 percent from 5.3 percent, all other things being equal, Australia & New Zealand Banking Group Ltd. analysts Paul Deane and Victor Thianpiriya wrote in a report today.

“The USDA September stocks report was bearish for corn,” Deane and Thianpiriya wrote.

Inventory Cushion

The USDA data signaled a “greater inventory cushion,” Goldman Sachs Group Inc. analysts Lindsay Drucker Mann, Robert Koort and Evan Stampler said Sept. 30. “We continue to project weak feed demand and limited ethanol production growth.”

Still, demand for U.S. exports may continue to support prices, the Goldman analysts said. The bank maintained its $7 forecast for the season that began Sept. 1.

“Stronger exports driven by tight global corn inventories and competitive U.S. prices will offset the larger supply,” according to Goldman.

Hedge-fund managers and other large speculators decreased their net-long position in Chicago corn futures in the week ended Sept. 27, according to U.S. Commodity Futures Trading Commission data.

Speculative long positions, or bets prices will rise, outnumbered short positions by 308,792 contracts on the Chicago Board of Trade, the Washington-based commission said in its Commitments of Traders report. Net-long positions fell by 42,486 contracts, or 12 percent, from a week earlier.

Oilseed Slump

Wheat for December delivery fell as much as 1.1 percent to $6.025 a bushel and was at $6.035 in recent trading, following a 6.9 percent plunge on Sept. 30. The grain lost 23 percent in September, the biggest monthly drop since March 1974.

November-delivery soybeans declined 0.9 percent to $11.6875 a bushel, after dropping to $11.655, the lowest level since Oct. 12, 2010. The oilseed slumped 19 percent in September, the biggest monthly drop since September 2008, and 8.9 percent in the three months ended Sept. 30.

--Editors: John Deane, Dan Weeks

To contact the reporter for this story: Phoebe Sedgman in Melbourne at psedgman2@bloomberg.net Rudy Ruitenberg in Paris at rruitenberg@bloomberg.net.

To contact the editor responsible for this story: James Poole in Singapore at Jpoole4@bloomberg.net Claudia Carpenter at ccarpenter2@bloomberg.net.


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