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Wheat Enters Bear Market as Corn Drops on Supply Outlook

Photographer: Megan

A man walks through a wheat field in Barton County, Kansas on April 30, 2014. Durisin/Bloomberg Close

A man walks through a wheat field in Barton County, Kansas on April 30, 2014. Durisin/Bloomberg

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Photographer: Megan

A man walks through a wheat field in Barton County, Kansas on April 30, 2014. Durisin/Bloomberg

Wheat futures entered a bear market and corn fell to a four-month low as the U.S. government said global supplies will be bigger than analysts estimated.

World wheat inventories by the end of May will reach 188.61 million metric tons, the U.S. Department of Agriculture said today in a report. That compares with last month’s estimate of 187.4 million and 188.08 million forecast by analysts in a Bloomberg survey. The agency also increased its estimate for domestic reserves and said global corn stockpiles will rise to a 15-year high.

Rising grain supplies are helping to keep global food costs in check, with the United Nations saying that world prices fell in May for the second straight month. The Standard & Poor’s GSCI Agricultural Index of eight crops fell for a sixth straight week through June 6, the longest slump since October 2011.

“There is nothing positive for prices with building global supplies,” Dale Durchholz, the senior market analyst at AgriVisor LLC in Bloomington, Illinois, said in a telephone interview. “The next two months of weather are critical for crop development and final yields.”

Wheat futures for July delivery fell 2 percent to settle at $5.8925 a bushel at 1:15 p.m. on the Chicago Board of Trade. Earlier, the price touched $5.885, the lowest for a most-active contract since Feb. 27.

The grain has slumped 20 percent from a 14-month closing high of $7.39 on May 6. That decline heralds a bear market. The U.S. is the world’s top exporter.

Global Output

The USDA said global wheat output will increase to 701.6 million metric tons from 697 million forecast last month as production outside the U.S. increases. The crop was seen lower in the U.S. after a drought cut yields, agency data showed.

“The only thing that’s bullish for the grains are low prices, but just because prices are low doesn’t mean it’s cheap,” Sterling Smith, a futures specialist at Citigroup Futures in Chicago, said in a telephone interview. “There’s no rush to demand.”

Corn futures for December delivery dropped 0.7 percent to $4.4175 a bushel in Chicago. The most-active contract touched $4.39, the lowest since Feb. 11.

The grain has slumped 20 percent in the past 12 months on forecasts for rising U.S. and world inventories. Larger supplies lower the cost outlook for ethanol makers including Poet LLC, Archer-Daniels-Midland Co. (ADM) and Valero Energy Corp. and for chicken producers including Tyson Foods Inc. (TSN) and Sanderson Farms Inc., which buy corn for livestock feed.

Beneficial Weather

A favorable mix of rain, sunshine and warmer temperatures in the next two weeks will boost development of corn and soybeans in the U.S., the biggest grain and oilseed producer, Don Keeney, a senior agricultural meteorologist at MDA Information Systems Inc. in Gaithersburg, Maryland, said in a telephone interview.

Yields for corn will rise to a record 167.5 bushels an acre this year, topping the USDA’s estimate of 165.3 bushels, with soybeans climbing to 45.9 bushels, compared with the agency’s forecast of a record 45.2 bushels, Keeney said.

The USDA also raised its forecasts for world inventories of soybeans and rice before the 2015 harvests.

Soybean futures for November delivery fell 0.7 percent to $12.2075 a bushel.

To contact the reporters on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net; Megan Durisin in Chicago at mdurisin1@bloomberg.net

To contact the editors responsible for this story: Millie Munshi at mmunshi@bloomberg.net Patrick McKiernan, Joe Richter

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