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Wheat, Corn Futures Drop on Rising World Production, Inventories

Wheat, Corn Tumble on Rising World Inventories
Harvested winter wheat is dumped from a wagon into a grain bin in Kirkland, Illinois. Photographer: Daniel Acker/Bloomberg

Wheat futures tumbled the most this month and corn fell after the U.S. government boosted its estimates for global stockpiles, signaling increased supplies for makers of food, animal feed and ethanol.

World inventories of wheat before next year’s Northern Hemisphere harvests may total 202.37 million metric tons, the most since 2002, the U.S. Department of Agriculture said today in a report. Global corn reserves were pegged at 123.19 million tons, 4.9 percent higher than a September forecast. Both projections exceeded analysts’ expectations. The USDA also cut its estimates for exports of both commodities.

Corn and wheat prices this year reached the highest since touching records in 2008, as rising demand for meat boosted consumption of grain used in livestock feed, and as refining of grain-based fuels increased. While production of both crops will decline this year in the U.S., the world’s largest exporter, output is growing elsewhere.

“With these high prices in the world, people are trying to cut back a little on demand,” Don Roose, the president of U.S. Commodities Inc. in West Des Moines, Iowa, said in a telephone interview. “High prices have been the signal for more production, at the same time.”

Wheat Plunges

Wheat futures for December delivery plunged 5.1 percent to settle at $6.2675 a bushel at 1:15 p.m. on the Chicago Board of Trade, the biggest drop since Sept. 30. The price has fallen 21 percent this year.

Yesterday, wheat surged 8.1 percent on speculation that the U.S. might recover lost market share in exports. Wheat touched a three-month high in August, before tumbling 23 percent in September.

“Never underestimate the supply response of farmers to high prices,” said Sal Gilbertie, the president of Santa Fe, New Mexico-based Teucrium Trading LLC, which this year added exchange-trade products linked to wheat and soybeans. “Global wheat production rose because of the high prices.”

Corn futures for December delivery dropped 0.7 percent to settle at $6.4075 a bushel on the CBOT, the first drop in three days. The most-active contract earlier reached a two-week high of $6.55, after yesterday jumping the exchange limit of 40 cents. The price has gained 11 percent in the past year.

World corn production in the crop year that began Oct. 1 will be a record 860.09 million tons, up 3.8 percent from a year earlier, the USDA said. The agency boosted its forecast for China’s crop by 2.2 percent to a record 182 million tons, and said Ukraine will harvest 21 million tons, up 76 percent from last year.

‘Weaker’ Exports

“The increased crops in China and Ukraine will deter U.S. exports,” Rich Nelson, the director of research for McHenry, Illinois-based Allendale Inc., said in a telephone interview. “Exports will be weaker, but lower prices may spur some fresh buying.”

U.S. corn exports in the marketing year that began Oct. 1 will fall to 40.64 million tons, down 13 percent from last year and the lowest since 2003, the USDA said today. Wheat exports forecast at 26.54 million tons were below last month’s estimate and 25 percent smaller than last year.

“The demand side of the corn balance sheet is understated, Teucrium’s Gilbertie said. “Demand at these prices is more inelastic,” limiting additional losses because margins for meat and fuel producers have improved, Gilbertie

Corn is the biggest U.S. crop, valued at $66.7 billion in 2010, followed by soybeans at $38.9 billion, USDA data show. Wheat ranks fourth at $13 billion, behind hay.

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