Corn traders are the most bullish since March on mounting concern that hot and dry weather will curb U.S. yields at a time of accelerating demand from China, the second largest buyer of U.S. farm goods.
Nineteen of 27 analysts surveyed by Bloomberg expect prices to gain next week and three were neutral, the highest proportion since March 30. Iowa, Illinois and Indiana, which produce 40 percent of the U.S. crop, are poised for a seventh consecutive month of above-normal temperatures, the most since 1895, T-Storm Weather LLC said yesterday. U.S. export sales of corn surged 83 percent in the week ended May 10, from a week earlier, U.S. Department of Agriculture data show.
Corn jumped 9.1 percent since May 11, heading for the best week in almost a year and rebounding from a slump caused by the USDA predicting a record crop the day before. Hedge funds and other speculators have raised bets on higher prices for two consecutive weeks, according to the Commodity Futures Trading Commission. Parts of the Midwest got 25 percent of normal rain in the past two weeks, National Weather Service data show.
“People are starting to get worried about new crop yields,” said Nick Higgins, an analyst at Rabobank International in London. “We won’t really have a good idea until we see the late June and early July temperatures, because that’s when the majority of yields are really decided.”
Corn fell 2 percent to $6.3375 a bushel on the Chicago Board of Trade this year as the USDA forecast a record U.S. harvest of 14.79 billion bushels (376 million metric tons). The Standard & Poor’s GSCI gauge of 24 commodities fell 2.1 percent and the MSCI All-Country World Index (MXWD) of equities is little changed. Treasuries returned 1.4 percent, a Bank of America Corp. index shows.
China imported 2.9 million tons of grain from the U.S. since the marketing year began Sept. 1, about nine times more than a year earlier, USDA data show. U.S. corn export sales totaled 865,097 metric tons the week ended May 10, compared with 473,411 a week earlier. The USDA announced April 27 that unknown buyers bought 1.44 million tons of corn, the biggest one-day sale since 1994. China bought $18.85 billion of U.S. farm products in 2011, second to Canada, USDA data show.
September futures on the Dalian Commodity Exchange in China closed May 16 at the equivalent of $9.58 a bushel, up 4.9 percent this year, data compiled by Bloomberg show. China’s cost of importing U.S. corn on May 14 fell to the lowest in two weeks, according to Shanghai JC Intelligence Co., using a formula that includes the price of grain, shipping, import tariffs and other taxes.
Rising demand is spurring growers globally to boost output. The USDA estimates world production at 945.78 million tons, the highest ever and 8.7 percent more than a year earlier. China, the biggest producer after the U.S., may harvest a record 197.5 million tons, the China National Grain & Oils Information Center said May 16.
Prospects for the U.S. crop would rebound if the weather improves, Macquarie Group Ltd.’s commodity analysts said yesterday in a report. Farmers typically start harvesting in September. An outlook for rising supplies from the Northern Hemisphere spurred the bank to cut its forecasts to an average of $5.865 for 2012 and $4.65 in 2013. The grain averaged $6.33 so far this year.
Deere & Co. (DE:US), the world’s largest maker of agricultural equipment, said in its earnings report on May 16 that prices will average $4.85 in the year beginning Sept. 1. The Moline, Illinois-based company had forecast $5.30 in February.
“A year from now certainly I would expect inventories to be much higher than what we’re sitting on now,” said Chris Narayanan, the head of agricultural commodities research at Societe Generale SA in New York. The USDA is anticipating a 19 percent jump in global stockpiles by the end of the next season.
The anticipated gain in inventories may be constrained by expanding demand. U.S. production of ethanol, derived from corn, climbed to 904,000 barrels a day last week, the most in more than two months, Energy Department data show. The USDA estimates that about 5 billion bushels of the U.S. crop will be used to make the fuel in 2012-13, close to the record 5.02 billion of the 2010-11 season.
U.S. farmers will feed livestock 5.45 billion bushels of corn, 20 percent more than a year earlier, the USDA estimates. China’s hog herd, the world’s biggest, was 5.5 percent larger in April than a year earlier, the government said May 16.
In other commodities, 13 of 26 traders and analysts surveyed by Bloomberg expect copper to fall next week and five were neutral, marking the most bearish outlook since November.
The metal for delivery in three months, the London Metal Exchange’s benchmark, fell to a four-month low of $7,625 a ton on May 16 on speculation demand will deteriorate as growth slows in China and concern mounts that Greece will exit the 17-nation euro region. China accounts for 41 percent of global consumption and Europe 18 percent, Barclays Plc estimates.
Gold analysts were bearish for the first time in six weeks, with 13 of 29 people surveyed expecting prices to fall next week. Five were neutral. The metal dropped to $1,526.70 an ounce on May 16 on Comex in New York, the lowest since Dec. 29. Investors are reducing gold holdings in exchange-traded products for a third consecutive month, the longest stretch since 2004, and favoring the dollar, data compiled by Bloomberg show.
Five of 11 people surveyed said raw sugar will decline next week and one was neutral. The commodity dropped 12 percent to 20.49 cents a pound on ICE Futures U.S. in New York this year. Sixteen of 28 people surveyed anticipate higher soybean prices next week. The oilseed gained 18 percent this year on the CBOT to $14.21 a bushel.
Investors took $1 billion out of commodities last month, with overall assets under management declining to $429 billion from $435 billion in March as prices dropped, Barclays said in a report yesterday.
“A lot of commodities have been sold off on concern about Europe and now increasingly more on China,” said Carole Ferguson, an analyst at Fairfax IS Ltd. in London. “When the dust settles, which I think will happen this year, interest in commodities will return.”
Gold survey results: Bullish: 11 Bearish: 13 Hold: 5 Copper survey results: Bullish: 8 Bearish: 13 Hold: 5 Corn survey results: Bullish: 19 Bearish: 5 Hold: 3 Soybean survey results: Bullish: 16 Bearish: 10 Hold: 2 Raw sugar survey results: Bullish: 5 Bearish: 5 Hold: 1 White sugar survey results: Bullish: 6 Bearish: 4 Hold: 1 White sugar premium results: Widen: 6 Narrow: 3 Neutral: 2
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