Corn Leads Grain Plunge as U.S. Reserve Tops Analysts EstimatesTony C. Dreibus
Corn plunged the most since May, sparking a slump in soybeans and wheat, after the government said U.S. inventories were bigger than analysts forecast and that farmers will plant the most since 1936.
Inventories of corn on March 1 totaled 5.399 billion bushels in the U.S., the world’s biggest grower and exporter, the Department of Agriculture said today. While that’s down 10 percent from 2012 and a nine-year low, analysts expected 4.995 billion. Farmers will sow 97.282 million acres, up from 97.155 million in 2012 and the most in 77 years, the USDA said.
Prices this month jumped 4.5 percent before today and reached a seven-week high yesterday on concern that rising demand from makers of ethanol and animal feed would erode inventories before a record harvest arrives in September. After today’s USDA report, corn prices plunged the maximum allowed on the Chicago Board of Trade, while soybeans fell the most since September and wheat futures had their biggest drop since 2011.
“It comes down to two things -- the size of the crop and feed usage,” Arlan Suderman, a senior market analyst at Water Street Solutions Inc. in Peoria, Illinois, said in a telephone interview. “Maybe USDA underestimated the size of the crop and then feed usage came in less than expected.”
Corn futures for May delivery plunged by the exchange’s 40-cent limit, or 5.4 percent, to settle at $6.9525 a bushel as of 2 p.m. in Chicago, the biggest decline since May 22 and the lowest price since March 8. Trading was more than triple the average of the past 100 days.
As of March 19, hedge funds and other speculators had boosted net-long positions, or bets that corn prices would rise, for three straight weeks to 145,535 futures and options contracts, the most since Feb. 5, U.S. Commodity Futures Trading Commission data show.
The government quarterly inventory reports have become harder to predict, resulting in more surprises and big price moves. In the six years prior to today, analysts’ estimates for March inventories missed the USDA tally by 123 million bushels on average, according to data compiled by Bloomberg. That’s enough corn to feed 15.4 million pigs, or 14 percent of the U.S. herd, until they are big enough to be sold for slaughter.
For the 11 quarters since June 2010, the average intraday price swing on the day of the USDA inventory report was 5.6 percent, with prices rising six times and falling five.
Operators of cattle feedlots probably used less of the grain as the domestic herd on March 1 dropped 7 percent from a year earlier, more than the 6.4 percent expected by analysts, Dennis DeLaughter, an analyst at Vantage RM in Houston, said by telephone.
The worst drought since the 1930s cut corn production by 13 percent and left inventories on Dec. 1 at 8.03 billion bushels, the lowest for that date since 2003, according to the USDA. Use of the grain in livestock feed for the year that began Sept. 1 is forecast to rise to 4.55 billion bushels from 4.548 billion a year earlier, even after the price gained 17 percent in the 12 months through yesterday.
The production decline may have been overstated, DeLaughter said. The USDA raised its Dec. 1 corn stockpiles estimate by 2.26 million bushels, indicating more was in storage at the beginning of that month than previously thought.
“That tells us there was a very large amount of corn that was uncounted during the fall quarter,” Terry Reilly, a senior commodity analyst at Chicago-based Futures International LLC, said by e-mail. “That lessens our confidence in USDA’s fall survey.”
Soybean stockpiles on March 1 totaled 999 million bushels, also the lowest since 2004 and down 27 percent from 1.374 billion a year earlier, the USDA said. Analysts forecast inventories at 948 million bushels.
Last year’s drought and increased sales to China eroded inventories in the U.S., which until this year was the world’s biggest shipper of the oilseed. Exports from Sept. 1 through March 14 totaled 31.9 million metric tons, up 24 percent from the same period a year earlier, USDA data show.
Soybean planting will drop 0.1 percent to 77.126 million acres, the USDA said, based on its annual survey of farmers. Analysts forecast an increase to a record 78.351 million. Seeding may decline because growers expect prices to drop as output rises in South America. Brazil’s crop is forecast by the USDA at a record 83.5 million tons and exports at 38.4 million, making it the world’s largest shipper.
“About the only positive number we saw in the report was lower new-crop soybean acres,” Lawrence Kane, a market adviser at Stewart-Peterson Group in Yates City, Illinois, said in a telephone interview. “That was the only thing below average trade guess. There’s been a lot of things building against the soybean market, and the biggest thing that’s been building is the huge crop in South America.”
Soybean futures for May delivery tumbled 3.4 percent to close at $14.0475 a bushel on the CBOT, the biggest drop since Sept. 17.
March 1 wheat inventories totaled 1.234 billion bushels, up 2.9 percent from 1.199 billion a year earlier, according to the government. Analysts surveyed by Bloomberg expected 1.165 billion, on average.
Wheat futures for May delivery tumbled 6.7 percent to $6.875 a bushel on the CBOT, the biggest decline since September 2011.
Corn is the most valuable U.S. crop, followed by soybeans, hay and wheat, USDA data show.