Bloomberg News

Corn Drops After USDA Unexpectedly Lifts Global Supply Outlook

January 16, 2012

Jan. 13 (Bloomberg) -- Corn declined for a third straight day, extending the worst slump in three months, after the U.S. government unexpectedly increased its global supply estimate.

March-delivery corn declined as much as 1.1 percent on the Chicago Board of Trade to $6.05 a bushel, the lowest price for a most-active contract since Dec. 21. Futures traded at $6.0975 a bushel at 9:32 a.m. Singapore time, after plunging 6.1 percent yesterday, the most since Sept. 30.

Global production will exceed demand for the first time in three years as higher harvests in the U.S., the largest grower, Russia, Ukraine and the European Union more than offset losses in Argentina, the U.S. Department of Agriculture said yesterday. That prompted the agency to raise its world inventory estimate. Analysts had forecast a decline in this season’s stockpiles.

“This disappointed the bullish pre-report trade estimates,” Luke Mathews, a commodity strategist at Commonwealth Bank of Australia, said in a report today.

Inventories worldwide will rise to 128.14 million metric tons before this year’s Northern Hemisphere harvest, from 128.06 million tons a year earlier, the USDA said. Analysts surveyed by Bloomberg News had forecast the agency to cut this year’s projection to 123.23 million tons.

In the U.S., the stockpiles may total 846 million bushels before this year’s harvest, 12 percent more than analysts expected, a USDA report showed. The 2011 crop totaled 12.358 billion bushels, up from 12.31 billion estimated in December, while global output will reach a record 868.06 million tons.

Global Consumption

Global demand will rise to 867.98 million tons, smaller than the 868.6 million tons estimated last month, the USDA said.

“Markets once again proved their inability to predict the USDA’s moves, with consensus (ourselves included) directionally wrong on many estimates,” Morgan Stanley analysts led by Hussein Allidina said in a report yesterday.

Shares of Tyson Foods Inc., the largest U.S. meat producer, and Sanderson Farms Inc. advanced on speculation lower grain prices will cut costs, boosting their profitability. Tyson gained 1.1 percent to $19.96 in New York while Sanderson rose 6.3 percent to $50.41, the biggest increase in five months.

Soybeans for March delivery climbed 0.8 percent to $11.9175 a bushel, after closing 1.7 percent lower yesterday. Wheat for delivery in the same month was little changed at $6.055 a bushel.

--With assistance from Whitney McFerron and Jeff Wilson in Chicago. Editors: Ovais Subhani, James Poole

To contact the reporter on this story: Luzi Ann Javier in Singapore at ljavier@bloomberg.net

To contact the editor responsible for this story: James Poole at jpoole4@bloomberg.net


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