Bloomberg News

Corn Rebounds From 3-Year Low as Harvest Gain Less Than Forecast

November 08, 2013

Corn

Corn sits in a grain cart during harvest outside Malden, Illinois. Photographer: Daniel Acker/Bloomberg

Corn rebounded from the lowest price in three years after the government predicted smaller harvest gains than analysts forecast in the U.S., the world’s largest grower and exporter. Soybeans rose the most in eight weeks.

Farmers will collect a record 13.989 billion bushels of corn this year, the U.S. Department of Agriculture said today in a report. While that’s more than the 13.843 billion predicted in September and 30 percent above the drought-damaged harvest of 2012, it was less than the 14.029 billion expected by 36 analysts in a Bloomberg survey, on average.

The prospect of a record harvest sent prices tumbling into a bear market this year and down 50 percent from the record reached during last year’s drought, which cut output by 13 percent. Cheaper grain may boost profit for buyers including Archer-Daniels-Midland Co. (ADM:US), a grain processor and maker of ethanol, and Tyson Foods Inc. (TSN:US), a U.S. meat producer that feeds corn to livestock.

“The crop is not as big as everyone feared, and that provided the fodder for a rally,” Dale Durchholz, the senior market analyst for AgriVisor LLC in Bloomington, Illinois, said in a telephone interview. “Farmers have not been aggressively selling this year’s crop and now they will wait for a rally.”

Corn futures for delivery in December rose 1.5 percent to close at $4.2675 a bushel at 1:15 p.m. on the Chicago Board of Trade, after touching $4.295, the highest for a most-active contract since Nov. 1. Before the report, prices slid to $4.155, the lowest since August 2010. Trading was estimated at 660,816 contracts, the highest since Nov. 9, 2010, and more than double the 100-day average, data compiled by Bloomberg show.

Rising Reserves

Domestic corn reserves on Aug. 31, 2014, before next year’s harvest, will total 1.887 billion bushels, up from 1.855 billion forecast in September, after farmers harvest a record crop this year, the USDA said. Global inventories will jump 22 percent to a 13-year high.

The export forecast was increased to 1.4 billion bushels, up 14 percent from the September estimate, as lower prices for the grain are making U.S. corn more competitive abroad, the government said. The report was the first in two months after the USDA canceled its October assessments because of the government shutdown.

Soybean Rally

Soybeans rose after the government said most of the increase projected in U.S. production will be exported, Durchholz said.

Farmers will harvest 3.258 billion bushels this year, up 3.5 percent from 3.149 billion estimated in September and 7.4 percent more than last year’s drought-damaged crop of 3.034 billion, according to the USDA. Exports may rise 9.8 percent from a year earlier to 1.45 billion bushels, to push total demand for the U.S. crop to 3.243 billion.

Global output in the crop year that began Oct. 1 will be a record 283.54 million tons, up 5.8 percent from a year earlier as Brazil will top the U.S. as the biggest producer for the first time, the USDA said. Worldwide inventories before next year’s harvest will be 70.23 million tons, down from 71.54 million predicted two months earlier. Traders expected reserves of 72.4 million, on average.

“The world can’t get enough soybeans, and that will continue to support the market, even with record crops,” Mark Schultz, the chief analyst for Northstar Commodity Investment Co. in Minneapolis, said in a telephone interview. “Any kind of hot, dry weather that threatens crops in South America the next three months will boost prices.”

Soybean futures for delivery in January rose 2.3 percent to $12.96 a bushel on the CBOT, the biggest gain since Sept. 12, when the government cut its estimate for the U.S. crop. The oilseed jumped 3.6 percent this week, the most since the week ended Aug. 23, when dry weather was threatening yields.

To contact the reporter on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net

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


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Companies Mentioned

  • ADM
    (Archer-Daniels-Midland Co)
    • $53.11 USD
    • -0.06
    • -0.11%
  • TSN
    (Tyson Foods Inc)
    • $40.33 USD
    • -0.90
    • -2.23%
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