Corn spreads in Chicago have collapsed from a peak in July, and buying grain for December delivery is now cheaper than for March delivery as an early U.S. harvest and record Brazil exports are boosting immediate supply.
Corn for December delivery has slipped 6.8 percent in the past month to $7.4675 a bushel, while the March contract dropped 6.4 percent to $7.5025 a bushel in the same period, making corn for the closer date 3.75 cents cheaper. Buyers on July 20 had to pay 14.5 cents more for corn delivered in December.
About 39 percent of the U.S. corn crop was harvested as of Sept. 23, compared with an average of 13 percent over the previous five years, the U.S. Department of Agriculture reported yesterday. The most-active corn contract climbed to a record $8.49 a bushel on Aug. 10 as the worst U.S. drought in at least half a century crimped production prospects.
“The advanced early harvest in the U.S. has come to the market’s rescue for now,” Dave Norris, an independent grain broker in Harrogate, England, wrote in an e-mailed reply to questions today.
Exports from Brazil are also holding back prices for the nearest contract, said Pierre Raye, an analyst at Union InVivo, the largest exporter of French wheat. Brazil’s corn exports climbed to a record 2.76 million metric tons in August from 1.52 million tons in the year-earlier month, government data show.
“In the short term there’s a lot of Brazilian corn to feed the market,” Raye said by phone from Paris. “That’s why you see the corn price is having difficulty rising. In the short term, the market isn’t feeling the drop in U.S. availability.”
Harvest progress in the U.S. means farmers are now better able to gauge their yields, and can commit to selling their crop, according to Raye.
The U.S. corn harvest is forecast to slide to 272.5 million tons from 313.9 million tons in 2011-12, while output may drop to 841.1 million tons from 876.7 million tons, according to the U.S. Department of Agriculture. Global consumption is seen at 856.7 million tons in 2012-13, depleting stockpiles.
“There’ll be pressure on prices until the end of the year, beyond that there’s a risk that at a global level, the corn plate will become a little more empty,” Raye said.
Corn for delivery in July 2013 is trading at a discount to both the December and March contracts. Argentina will start exporting corn at the end of the first quarter, and expectations for bigger corn production in Latin America are weighing on the July contract, according to the InVivo analyst.