Corn Drops to 4-Week Low as USDA Sees More Supply

Corn futures tumbled to a four-week low after the U.S. government said domestic and world inventories will be bigger than forecast. Wheat rose.

U.S. corn reserves on Aug. 31, 2014, will total 1.855 billion bushels, up from 1.837 billion forecast in August, after farmers harvest a record crop this year, the Department of Agriculture said. Global inventories will jump 24 percent to a 12-year high, boosting supplies of the grain used to make livestock feed, ethanol and sweeteners.

The prospect of record harvests sent prices tumbling into a bear market this year as U.S. fields recovered from a drought in 2012. Cheaper grain may boost profit for buyers including Archer-Daniels-Midland Co. and Tyson Foods Inc. Food costs tracked by the UN fell to a 14-month low in August and are 15 percent below the record reached in 2011.

“The corn supplies are going to be excessive heading into 2014,” Chad Henderson, the president of Prime Agricultural Commodities Inc. in Brookfield, Wisconsin, said in a telephone interview. “Rising inventories of both corn and wheat mean that consumers will not have to rush out to buy ahead.”

Corn futures for delivery in December dropped 1.3 percent to close at $4.6625 a bushel at 1:15 p.m. on the Chicago Board of Trade, after touching $4.5625, the lowest for a most-active contract since Aug. 15. Prices are down 33 percent this year and 45 percent from a record $8.49 on Aug. 10, 2012.

Record Crops

U.S. farmers will collect a 13.843 billion bushels of corn in 2013, the most ever and up from the 13.763 billion estimated last month, the government said. The average projection of 34 analysts surveyed by Bloomberg was 13.641 billion. Domestic output will rise 28 percent from the drought-reduced harvest last year of 10.78 billion bushels, USDA data show.

“The corn crop was far enough developed that the hot, dry weather in August did not cause as much damage to yields as some expected,” Don Roose, the president of U.S. Commodities Inc. in West Des Moines, Iowa, said in a telephone interview. “This report is about rising supplies and lower prices to build some new demand.”

The USDA also said domestic wheat reserves before next year’s harvest will total 561 million bushels, compared with 551 million forecast in August and 544 million expected by analysts surveyed by Bloomberg News. World production will be 708.9 million metric tons, up from 705.4 million forecast a month ago and 655.2 million last year, the USDA said today.

“Record U.S. prices have encouraged global production of grain, reducing the dominance of U.S. exports on the world markets,” Roose said.

Wheat futures for delivery in December rose 0.8 percent to close at $6.53 a bushel in Chicago. After the USDA report, prices slipped as much as 1.7 percent to $6.3725, the lowest since Sept. 5. The grain is down 16 percent this year.

(Corrects low for wheat in final paragraph in story first published yesterday.)
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