Corn Falls to 11-Week Low on Slowing Demand; Soybeans Decline

Corn fell to the an 11-week low after the government said production of ethanol fell and inventories rose last week. Soybeans declined for a third time this week as rains aid crops in Brazil.

Production of ethanol in the U.S., mostly from corn, fell 13 percent in the week ended Dec. 14 from a year earlier, the Department of Energy said in a weekly report. About 42% of this year’s crop will be used to make ethanol, according to the U.S. Department of Agriculture. Stockpiles rose 4 percent last week from a year earlier to the highest since June. Ethanol producers are losing as much as 25 cents a gallon producing the fuel, according to Northstar Commodity Investments Inc.

“Ethanol production is slowing and inventories are still rising, a negative combination,” Mark Schultz, the chief analyst for Minneapolis-based Northstar, said in a telephone interview. “Corn demand is slowing.”

Corn futures for March delivery declined 1.5 percent to $7.09 a bushel at 11:20 a.m. on the Chicago Board of Trade, after touching $7.0575, the lowest since Sept. 28. The price through yesterday gained 11 percent this year after drought cut U.S. production 13 percent to a six-year low. The grain reached a record $8.49 on Aug. 10.

Soybean futures for March delivery dropped 1.1 percent to $14.4425 a bushel, heading for the first three-day decline since Nov. 12. Earlier, the oilseed touched $14.4225, the lowest since Dec. 4. Most-active futures through yesterday gained 21 percent this year after a drought in the U.S. triggered concern that supplies will fall short of growing demand from China.

Rain may boost Brazilian soybean production to 81.5 million metric tons in the marketing year that begins Feb. 1, up from 81.3 million forecast in November and 67.7 million harvested this year, the soybean processors group Abiove said today. The USDA predicts Brazil will surpass the U.S. as the top producer and exporter of the crop.

Favorable Conditions

Frequent rain the next two weeks from Paraguay to central Brazil will maintain favorable conditions for flowering plants, World Weather Inc. said in a report today. Yesterday, U.S. exporters said 420,000 tons of soybeans registered for delivery before Sept. 1 were canceled, including 300,000 tons to China.

“Harvest will ramp up by the middle of January in Brazil, and that will slow demand” for U.S. soybeans, Charles Sernatinger, a vice president at ABN Amro Clearing Inc. in Chicago, said in a telephone interview. “U.S. soybeans appear to be overpriced, and the Chinese seem to agree.”

Corn is the biggest U.S. crop, valued at $76.5 billion in 2011, followed by soybeans at $35.8 billion, 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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