Corn, Wheat, Soybean Futures Decline as USDA Supply Outlook Tops Forecast
Corn plunged the most allowed by the Chicago Board of Trade, and wheat and soybeans fell after the government said U.S. inventories will be bigger than analysts expected, easing supply concerns for food and fuel.
Corn stockpiles before next year’s harvest may climb to 900 million bushels from a 15-year low of 730 million this year, the Department of Agriculture said today. The price as much as doubled in the past year, helping to send world food costs to a record in February and boosting costs for livestock producers including Tyson Foods Inc. (TSN) and JBS SA, and makers of ethanol including Archer Daniels Midland Co.
Exports of corn by the U.S., the largest grower, may drop to 1.8 billion bushels in the 12 months that begin Sept. 1, the lowest in nine years, the USDA said. The agency also lowered its estimate for shipments in 2010, reflecting slowing world demand as prices rise, said Jason Britt, the president of Central States Commodities Inc., a brokerage in Kansas City, Missouri.
“At higher prices, you will eventually ration demand, and the market does its job,” Britt said. “We’re still historically tight, so you have to put everything in reference.”
Corn futures for July delivery tumbled by the limit of 30 cents, or 4.2 percent, to settle at $6.7725 a bushel at 1:15 p.m. on the CBOT, the lowest since March 31. The drop was the biggest in almost two months. The commodity is still up 80 percent in the past year on record use by ethanol producers and increasing demand from livestock farmers.
Supplies still may tighten as rain in the Midwest delays planting, Mark Connelly, a New York-based analyst at Credit Agricole SA, said in a report. “Poor weather is the biggest risk and is likely to weigh on future yield projections,” he said.
Wheat futures for July delivery fell 39.75 cents, or 5 percent, to $7.59 a bushel in Chicago, capping the biggest drop since March 15. The grain is up 54 percent in the past year after drought slashed output in Russia and floods eroded supplies from Canada and Australia.
Domestic inventories may total 702 million bushels next year, more than the 683 million expected by analysts, the USDA said. That’s still 16 percent less than projected stockpiles in the year ending May 31.
Production of winter wheat, which will be harvested starting next month, may drop to 1.424 billion bushels this year, down 4.1 percent from last year, as drought cuts crops in the Great Plains, the USDA said.
Government projections still may be “a little bit too big,” said Roy Huckabay, an executive vice president at the Linn Group in Chicago. “There will be a lot of abandonment, and some of this stuff that looks like partial crops now may end up zeroing out.”
Soybean futures for July delivery slid 6.25 cents, or 0.5 percent, to $13.3175 a bushel. The price is up 38 percent in the past year on record Chinese purchases of the oilseed, used to make livestock feed and cooking oil.
The USDA raised its estimate for domestic inventories to 170 million bushels in the year ending Aug. 31 from the April projection of 140 million. Analysts anticipated 151 million. U.S. reserves may drop to 160 million in the year beginning Sept. 1, the agency said.
“For the old crop numbers, the USDA is reflecting the fact that soybean-export sales are lagging,” said Mario Balletto, a market analyst at CitiGroup Global Markets in Chicago. “The new crop numbers are totally up in the air now. Acreage is very uncertain, and yields are highly uncertain. It’s very much dependent on the weather.”
Corn is the biggest U.S. crop, valued at $66.7 billion in 2010, followed by soybeans at $38.9 billion, government figures show. Wheat was fourth at $13 billion, behind hay.
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