Grain Prices Tumble as U.S. Sees Bigger Corn Supply, Wheat CropsJeff Wilson and Tony C. Dreibus
Corn futures tumbled the most in five weeks, leading declines in wheat and soybeans, after the U.S. said inventories will be bigger than analysts’ forecast as global production rebounds from a drought last year.
Record domestic corn output of 14.005 billion bushels this year will more than double inventories before the harvest in 2014, and soybean production will be 3.39 billion bushels, the most ever, the U.S. Department of Agriculture said today in a report. While drought damage late last year will reduce the 2013 U.S. wheat harvest, global output will rise 6.1 percent.
Corn, soybean and wheat futures that surged as the drought cut output in 2012 have tumbled into bear markets this year, easing global food prices that are down 9.5 percent from a record in February 2011. Even after wet, cool weather in April and May delayed planting, the USDA said it expects a 30 percent jump in 2013 corn production in the U.S., the world’s largest grower and exporter, and a 12 percent increased for soybeans.
“The market is reacting to the larger supply forecast than people expected,” Dale Durchholz, the senior market analyst for AgriVisor LLC in Bloomington, Illinois, said in a telephone interview. “This report signals there is no shortage developing, and takes away much of the speculator incentive to be bullish.”
Corn futures for delivery in December, after the harvest, fell 2.4 percent to close at $5.375 a bushel at 1:15 p.m. on the Chicago Board of Trade, the biggest drop for a most-active contract since May 6. Prices have tumbled 37 percent from a record $8.49 in August.
U.S. corn inventories before the 2014 harvest will total 1.949 billion bushels, up from 769 million this year, the lowest since 1996, the USDA said. The average estimate of 30 analysts surveyed by Bloomberg was 1.829 billion. The government said production in 2013 will be higher than the average estimate of 13.82 billion, based on a separate Bloomberg survey of 28 analysts. Farmers collected 10.78 billion in 2012.
World corn inventories on Oct. 1, 2014, will total 151.83 million metric tons, up from 124.31 million this year, the USDA said. Analysts expected 151.21 million tons, the average of 16 forecasts in a Bloomberg News survey.
U.S. wheat stockpiles on June 1, 2014, were forecast by the USDA at 659 million bushels, more than the 655 million expected by analysts and down from 670 million projected in May. Production in Kansas, the biggest U.S. producer, was pegged at 307.8 million bushels, up 2.7 percent from a May forecast, as precipitation in May boosted prospects for late-blooming plants.
As much as three times the normal amount of precipitation fell in central and eastern Kansas in May, National Weather Service data show. The harvest in the state, which last year at this time was 48 percent complete, hasn’t started in 2013 after cold weather prevented plants from coming out of winter dormancy.
“The rains we’ve had in the last two or three or four weeks were more beneficial than we thought,” Larry Glenn, an analyst at Frontier Ag in Quinter, Kansas, said by telephone. “There were some areas that got some good moisture.”
Wheat futures for July delivery fell 2 percent to $6.83 a bushel in Chicago, after touching $6.79, the lowest for a most-active contract since May 21. Prices have dropped 28 percent since reaching a nearly four-high of $9.4725 on July 23.
U.S. soybean inventories may also double before the 2014 harvest as production rebounds from three consecutive years of drought, the government said.
Reserves on Aug. 31, 2014, will total 265 million bushels, up from this year’s projection of 125 million, the USDA said today in a report. The average estimate of 30 analysts surveyed by Bloomberg was 268 million bushels. U.S. production was forecast at 3.39 billion, up from 3.015 billion harvested last year and above the 3.371 billion expected on average in a Bloomberg survey.
Soybean futures for November delivery, after the harvest, slipped 1 percent to $13.1425 a bushel on the CBOT, the second decline this week. Prices are down 27 percent from a record $17.89 in September on forecasts for record combined output in Brazil, the world’s top shipper of the oilseed, and Argentina, the leading exporter of soy-based animal feed and cooking oil.
Increased supplies later this year may reduce feed costs for meat producers including Tyson Foods Inc. and Smithfield Foods Inc.