Bloomberg News

Corn Enters Bear Market on Signs of Ample Supply in U.S.

April 01, 2013

Corn Futures Head for Bear Market on Signs of Ample U.S. Supply

Corn is stored in a warehouse at the Atherton Grain Co. Inc. elevator in Normandy, Illinois. U.S. corn inventories on March 1 totaled 5.399 billion bushels. Photographer: Daniel Acker/Bloomberg

Corn plunged the most in 24 years, entering a bear market, as bigger-than-expected U.S. stockpiles and increased planting signal ample supplies. Wheat tumbled to a nine-month low and soybeans dropped.

U.S. corn inventories on March 1 totaled 5.399 billion bushels, the Department of Agriculture said March 28. While down from a year earlier, that’s still above the 4.995 billion forecast by analysts surveyed by Bloomberg News. Farmers will plant 97.282 million acres this year, the most since 1936, the USDA said. Prices reached the lowest since June today.

After last year’s drought cut U.S. output by 13 percent and sent futures to a record, demand slowed as high grain costs forced livestock producers including Cargill Inc. to close beef plants, while ethanol producers including Poet LLC shut distilleries. Lower prices may further erode global food costs that fell for a fifth month in February, according to a gauge compiled by the United Nations’ Food & Agriculture Organization.

“The market expected a bullish report last week and got the opposite,” Dave Marshall, a farm marketing adviser at Toay Commodity Futures Group LLC in Nashville, Illinois, said in a telephone interview. “Today we’re just seeing follow-through selling from being caught on the wrong side of the market.”

Corn futures for May delivery tumbled 7.6 percent to settle at $6.4225 a bushel at 2 p.m. on the Chicago Board of Trade, after touching $6.365, the lowest for a most-active contract since June 29. Today’s decline was the biggest percentage drop since July 18, 1988.

Trading was three times the average of the past 100 days at that time of day. On March 28, the grain plunged by the 40-cent limit after the USDA report. Prices in Chicago are down 23 percent since last year’s closing high of $8.3875 on Aug. 21, meeting the definition used by some investors to identify a bear market.

Daily Limit

The daily trading limit for corn was widened to 60 cents, the exchange said in a statement. The crop is the most-valuable in the U.S., the world’s biggest grower and exporter, followed by soybeans, hay and wheat, government data show.

Prices rallied to an intraday record of $8.49 on Aug. 10 as the worst U.S. drought since the 1930s scorched crops. Since then, farmers in South America have boosted output, and Midwest growers are planning to expand production. Corn has dropped in seven of the past eight months.

In the week ended March 25, hedge funds and other large speculator increased their bets on a corn rally by 32 percent to 192,561 futures and options contracts, Commodity Futures Trading Commission data show. That’s the highest since Dec. 11 and was a fourth straight gain.

Supply Surprise

Investors who increase their long position before the bearish stockpiles report will be “looking to get out,” Rich Feltes, the vice president of research for R.J. O’Brien & Associates in Chicago, said by telephone. “It’s going to take some time” for prices to find support after inventories beat expectations, he said.

Wheat futures for May delivery fell 3.5 percent to $6.64 a bushel in Chicago, after slipping to $6.5975, the lowest for a most-active contract since June 20. The price dropped 6.7 percent on March 28.

Soybean futures for May delivery declined 1 percent to $13.9075 a bushel on the CBOT, after touching $13.8625, the lowest for a most-active contract since Jan. 14.

To contact the reporter on this story: Tony C. Dreibus in Chicago at tdreibus@bloomberg.net, or Katia Dmitrieva in Toronto at edmitrieva1@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net


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