Grains Slump as Demand Slowdown Eases Strain on Tightening Global Supplies
Corn futures fell from a six-week high, and wheat and soybeans slid on speculation that U.S. grain inventories will be sufficient as Europe’s faltering economy erodes demand.
U.S. corn stockpiles before next year’s harvest may be 843 million bushels, or 5.4 percent more than analysts in a Bloomberg News survey expected, the Department of Agriculture said today. The agency boosted its forecast for domestic soybean supplies and projected domestic and global wheat supplies that were bigger than analysts forecast.
Crop prices fell in tandem with global equities and commodities on heightening concern that European’s debt crisis is spreading to Italy. The USDA said demand for corn used for livestock feed will be 2.1 percent less than forecast at 4.6 billion bushels.
“The USDA report does not provide much incentive for users of corn, soybeans and wheat to boost purchases, with the European debt crisis hanging over the market,” said Sal Gilbertie, the president of Santa Fe, New Mexico-based Teucrium Trading LLC, which this year added exchange-traded products linked to wheat and soybeans. “Increasing global supplies are offsetting a drop in U.S. production.”
Corn futures for December delivery fell 0.7 percent to settle at $6.56 bushel at 1:15 p.m. on the Chicago Board of Trade. Earlier, the price reached $6.66, the highest for a most- active contract since Sept. 27. The grain has climbed 4.3 percent this year.
Soybean futures for January delivery fell 1.6 percent to $11.855 a bushel on the CBOT, the biggest drop since Sept. 30. The oilseed has declined 16 percent this year on prospects for increasing supplies from competing suppliers in Brazil and Argentina.
The USDA lowered its estimate for soybean exports by 3.6 percent to 1.325 billion bushels. Inventories before the 2012 harvest may rise to 195 million bushels, 22 percent higher than projected last month and more than analysts expected.
“A more comfortable global balance justified lowering U.S. exports,” Hussein Allidina, the head of commodity research at Morgan Stanley in New York, said in a report. “While we expect that we will ultimately see upside to U.S. crush demand as we move through the season, and continue to project a tighter 2011- 2012 balance than the USDA, we expect a negative price reaction to today’s report.”
Wheat futures for December delivery declined 2.1 percent to $6.43 a bushel in Chicago, ending a four-session rally. The price has dropped 19 percent this year.
World inventories before the 2012 Northern Hemisphere harvest may total 202.6 million metric tons, more than forecast last month and the highest in 10 years, the USDA said today. Production has rebounded in Russia and Eastern Europe following drought last year, Australia’s output is close to a record high, and India may harvest the most ever, according to the USDA.
“Global stocks are a lot more comfortable than they were last year,” Luke Chandler, the global head of Agri Commodity Markets Research at Rabobank International in London, said in a telephone interview. “We’ve got a large exportable surplus in a number of key exporting nations. Without the tighter corn story, I think we would be trading a lot lower in wheat.”
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 ranks fourth at $13 billion, behind hay.
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