Corn Supply Cuts Chance of ‘Extreme Bull Case,’ Goldman Says

A government report today that showed larger U.S. corn inventories than forecast has cut the “probability of an extreme bull case” for prices, analysts at Goldman Sachs Group Inc. said.

Corn supplies totaled 1.128 billion bushels as of Sept. 1, the U.S. Department of Agriculture said today. That’s 20 percent higher than 942 million expected on average in a Bloomberg survey of 24 analysts. Prices are headed for the biggest monthly drop in at least five decades and plunged to a three-month low today in Chicago.

Today’s data signaled a “greater inventory cushion,” Goldman analysts Lindsay Drucker Mann, Robert Koort and Evan Stampler said in the e-mailed report. “We continue to project weak feed demand and limited ethanol production growth.”

Stockpiles outpaced forecasts as consumption in the U.S. fell 2.3 percent from a year earlier to 2.54 billion bushels in the three-months ended Aug. 31. Demand dropped after prices rallied to a three-year high in June on adverse weather concerns. Futures tumbled in September amid concern that slowing global growth will trim commodity demand. The U.S. is the world’s biggest user, producer and exporter of the grain.

Today’s Trading

Corn futures for December delivery tumbled the 40-cent exchange limit, or 6.3 percent, to $5.925 a bushel on the Chicago Board of Trade, the lowest for a most-active contract since July 1. The price lost 23 percent for September, capping the biggest monthly decline in records going back to 1959.

Still, demand for U.S. exports may continue to support prices, the analysts said. The bank maintained its $7 forecast for the season that began Sept. 1.

“Stronger exports driven by tight global corn inventories and competitive U.S. prices will offset the larger supply,” Goldman said.

U.S. reserves before the 2012 harvest will fall to 669 million bushels, or 5.2 percent of consumption, down from 8.5 percent estimated for this year, Goldman said. U.S. corn production this year may fall to 12.426 billion bushels from 12.447 billion last year, the analyst said. On Sept. 12, the USDA forecast this season’s harvest at 12.497 billion.