Corn Falls as Rally May Curb Demand; Soy, Wheat Drop on Rain

Corn fell the most in five weeks on speculation that demand is slowing after a crop-damaging U.S. drought sent prices to a record this month. Soybeans and wheat declined as rain aided parched fields from Kansas to Ohio.

Premiums for corn delivered to export terminals near New Orleans fell to the lowest since January 2011, U.S. Department of Agriculture data show. The government is reviewing mandates for ethanol use after corn futures jumped more than 60 percent since mid-June, drawing complaints from livestock producers that too much grain is being diverted to make fuel.

“We know there is a shortage of corn, but at current prices, the demand for the grain will slow, especially from overseas buyers,” Greg Grow, the director of agribusiness for Archer Financial Services in Chicago, said in a telephone interview. “The anti-ethanol campaign has encouraged traders to sell out long positions.”

Corn futures for December delivery dropped 2.1 percent to close at $7.9225 a bushel at 2 p.m. on the Chicago Board of Trade, the largest drop for the most-active contract since July 6. The grain used to make animal feed, fuel and food touched a record $8.49 on Aug. 10.

The USDA forecast on Aug. 10 that corn demand will shrink 10 percent from a year earlier as a drought cuts production by 13 percent. Crop conditions on Aug. 5 were the worst since 1988. The agency estimated ethanol plants will consume 4.5 billion bushels of corn in the year that starts Sept. 1, down from 5 billion a year earlier. One bushel of the grain makes at least 2.75 gallons of ethanol.

The U.S. and France will hold a conference call this month to determine whether to convene a meeting of a rapid-response forum to discuss a surge in grain and soybean prices, according to a spokesman for the French Agriculture Ministry.

Soybeans, Wheat

Soybeans fell on speculation that rain during the past week and cooler weather this week may help to increase Midwest yields as plants begin to fill pods with beans, Grow said. Showers also will help to boost U.S. spring-wheat yields in the northern Great Plains and improve soil moisture for winter-wheat planting across the southern Plains, he said.

“Rain will definitely add some soybeans to this year’s crop,” Grow said. “Any rain ahead of the planting season is beneficial for getting the crop off to a better start.”

Soybean futures for November delivery fell 2.6 percent to settle at $16.0075 a bushel in Chicago, the first drop in four sessions. The government said Aug. 10 that production would fall to a five-year low. The most-active contract touched a record $16.915 on July 23.

Wheat futures for December delivery slumped 2.8 percent to $8.7575 a bushel on the CBOT, the biggest decline since July 31.

Corn is the biggest U.S. crop, valued at $76.5 billion in 2011, followed by soybeans at $35.8 billion, government figures show. Wheat is the fourth-largest at $14.4 billion, behind hay.

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

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

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