Corn Prices Tumble as Supply Outlook Improves in Top Exporters

  • CBOT options volume rises to estimated all-time high
  • Midwest rains aid U.S. crops, Brazil’s harvest advances

Corn futures in Chicago fell by the most in three years and prices slumped in Sao Paulo state as the supply outlook improves in the U.S. and Brazil, the world’s top exporters.

U.S. rains through June 26 are seen aiding about half the crop in the Midwest, and the growing area is unlikely to encounter severe heat through mid-July, according to Joel Widenor, director of agricultural services at Commodity Weather Group LLC in Bethesda, Maryland. In Brazil, harvesting of the country’s winter crop is picking up pace and helping to ease a supply squeeze.

“The weather patterns are taking out some of the heat, and we’re also adding a little bit of moisture” in the U.S., Ryan Kelbrants, a market analyst at CHS Hedging LLC in Inver Grove Heights, Minnesota, said in a telephone interview. “Our crop scouts are reporting excellent conditions.”

Corn futures for September delivery on the Chicago Board of Trade fell 5.7 percent to close at $4.0225 a bushel, the biggest loss for rolling most-active futures since April 2013. It was the largest drop for the contract since it began trading. Aggregate trading was 87 percent higher than the 100-day average.

Futures for July, September and December delivery all declined by as much as the exchange’s 25-cent maximum Tuesday, and limits for Wednesday trading have been expanded. Corn options volume is estimated to have reached a record at 313,867 contracts, data compiled by Bloomberg show.

‘Perfect’ Rains

Weather models showing rains near the end of the month pressured prices, as the precipitation is forecast to occur during the crop’s key pollination phase and reach southern areas of the growing belt where moisture is needed, said Ted Seifried, chief market strategist at Zaner Group LLC in Chicago. The latest outlook from the National Weather Service shows above-normal rains in the southern Midwest in the six-to-10 day outlook.

“The timing of these rains is perfect,” Seifried said. Corn prices fell more sharply than soybeans because the key development phase for the oilseed occurs later in the year, he said.

September futures climbed in each of the past six weeks, the longest streak for the contract since it started trading in December 2013. A hot start to the U.S. growing season had raised concerns that plants would be under stress during the summer. Three-quarters of the U.S. crop was rated in good or excellent condition as of June 19, higher than the same time last year, government data showed Monday.

Hedge funds have been increasing net-bullish wagers on corn for the past five weeks, with holdings in the week ended June 14 at the highest in more than 10 months, Commodity Futures Trading Commission data show.

Wholesale spot-prices for corn in Campinas, Sao Paulo, dropped to 48.40 reais per bag ($6 bushel) on Monday, down 10 percent from a record high on June 2 and the lowest since April 25. The grain climbed earlier this month as dry weather hurt plants and rising exports sparked a shortage for Brazil’s domestic consumers. As crop collection progresses, the domestic supply squeeze is easing and buyers are trying to negotiate lower prices, according to Cepea, the University of Sao Paulo’s research arm.

In Mato Grosso, Brazil’s corn top producer, gathering is happening at a faster pace compared with previous seasons, according to Imea, the state’s Rural Economy Institute. About 10 percent of the total winter-crop area was harvested as of Friday, the group in a report. That was up from 5 percent a week earlier. Domestic prices are still profitable for producers, and farmers will take advantage of selling opportunities in coming weeks, Imea said.

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