Corn rallied after declining the most in two months yesterday, as forecasts of lower yields in the U.S., the world’s largest grower, prompted purchases amid expectations of further price increases.
December-delivery corn gained 1.1 percent to $7.4625 a bushel on the Chicago Board of Trade by 11:21 a.m. in London, paring this week’s drop to 2.6 percent. Futures climbed 15 percent last month.
Production of corn, the nation’s largest crop, will total 12.35 billion bushels, down from last month’s estimate of 13.002 billion, INTL FCStone Inc. said yesterday. FCStone joined Morgan Stanley and the Professional Farmers of America in lowering yield and production estimates on unfavorable weather in the U.S.
“You’re probably seeing some people still coming in and thinking corn’s still not a bad buy at these levels, given the risks are that we’re seeing some pretty negative estimates on U.S. corn yields,” said Paul Deane, an economist at Australia & New Zealand Banking Group Ltd. “Even though it’s pushed lower, it’s probably justified at these levels.”
About 12.484 billion bushels of corn will be harvested, less than the 12.914 billion forecast by the U.S. Department of Agriculture on Aug. 11, Pro Farmer said on Aug. 26. Morgan Stanley said Aug. 29 that corn yields may average 149.5 bushels an acre, compared with the USDA’s estimate of 153 bushels.
“There’s still upside in corn if we see those yield estimates,” Deane said by phone from Melbourne. Prices may rise “significantly above $8 in a month or so” if lower yield estimates come through, he said.
Corn and soybeans may extend gains, outperforming other agricultural commodities, as worsening weather in the U.S. may hurt crop yields and tighten supplies, according to Mirae Asset MAPS Global Investments.
Increasing feed-grain demand led by China and low inventories should also push up corn and soybean prices, according to Kwon Jung Hoon, manager of South Korea’s biggest agriculture-commodity fund, which is run by Mirae Asset MAPS.
Corn, used in food, livestock feed and biofuels, is the second-best performing commodity in the past year on the Standard & Poor’s GSCI Commodity index.
Corn dropped 3.8 percent yesterday, the biggest decline since July 1, after the USDA said overseas sales decreased. Exporters last week sold 957,934 metric tons of corn for delivery after Sept. 1, down 43 percent from a year earlier, the department said. Total sales for the new season are 8.7 percent smaller than a year earlier.
Soybeans for November delivery gained 0.5 percent to $14.4175 a bushel, set to extend their weekly advance to 1.3 percent. Wheat for December delivery rose 1 percent to $7.69 a bushel, heading for a weekly decline of 3.5 percent after falling the most in three weeks yesterday. Milling wheat for November delivery traded on NYSE Liffe in Paris slipped 0.5 percent to 207.75 euros ($296.06) a ton.
The European Union’s weekly wheat export licenses fell to 276,000 tons in the week to Aug. 30 from 326,000 tons a week earlier, according to the European Commission.
To contact the reporter for this story: Phoebe Sedgman in Melbourne at email@example.com