Corn Plunges Most Since January, Extending Slump, on U.S. Supply Increase

Corn futures plunged the most since January after the U.S. said supplies left from last year’s crop climbed to the highest level since 2006.

Inventories on Sept. 1 rose 2 percent to 1.708 billion bushels from a year earlier, the Department of Agriculture said yesterday. That was 322 million bushels above the agency’s Sept. 10 estimate. Corn tumbled 30 cents today, the most allowed by the Chicago Board of Trade. The grain surged 33 percent in the third quarter, the most for that period since 1974.

“Supplies are more comfortable on paper, and that has reduced the sense of urgency for end-users to jump back into the market and add to positions,” said Shawn McCambridge, the senior grain analyst at Prudential Bache Commodities LLC in Chicago.

Corn futures for December delivery fell 6.1 percent to close at $4.6575 a bushel at 1:15 p.m. on the CBOT, the biggest drop for a most-active contract since Jan. 12. The U.S. is the world’s biggest producer and exporter.

In the third quarter, hedge funds increased bets on higher prices to a record.

Fund managers and other large speculators increased their net-long positions to 429,189 contracts in futures and options in the week ended Sept. 28, up from 13,045 on June 29, according to U.S. Commodity Futures Trading Commission data.

“We started to see funds liquidating long positions yesterday, and it is continuing today,” McCambridge said.

‘Active Rebalancing’

Funds sold an estimated 35,000 futures contracts today, said Charles Sernatinger, a vice president at ABN Amro Clearing LLC in Chicago

In the third quarter, corn had the fourth-biggest gain among 19 raw materials in the Reuters/Jefferies CRB Index behind sugar, wheat and cotton. Crude oil gained 5.7 percent.

“We had active rebalancing today with funds selling agriculture and buying energy markets,” Sernatinger said. “You have broken the backs of the bulls” who bet on falling U.S. corn supplies, he said.

This week, oil jumped 6.7 percent, the most since mid- February.

Corn also fell as forecasts for dry weather in the next two weeks boosted harvest prospects, Prudential’s McCambridge said.

In September, the USDA predicted a record crop of 13.16 billion bushels (334.3 million metric tons), up 0.4 percent from last year. The government will update its projection on Oct. 8.

“The harvest weather is a psychological negative factor,” McCambridge said. “Farmers are busy harvesting, but most of the crop is going into storage.”

Corn is the biggest U.S. crop, valued at $48.6 billion in 2009, government figures show.

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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