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Corn Bets Turn Bearish as Rain Revives U.S. Crops: Commodities

July 11, 2013

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July 11 (Bloomberg) -- U.S. corn production is rebounding the most in two decades as farms recover from last year’s drought-plagued harvest. Hedge funds are bearish on prices for the first time since 2010.

Output this year will jump 29 percent to a record 13.95 billion bushels (355.2 million metric tons), the biggest increase since 1994, the U.S. Department of Agriculture said today in a report. That will add enough grain to supply the 28- nation European Union and Japan for a year and more than double U.S. inventories before the harvest in 2014. Futures will drop 9.4 percent to $4.75 a bushel in three months, the lowest since October 2010, Goldman Sachs Group Inc. estimates.

Farmers planted the most acres since 1936 this season as some Midwest fields got three times their normal rainfall, including a record soaking in Iowa, the top growing state. Corn tumbled 18 percent in the cash market from the peak during last year’s drought, reducing costs for buyers including Archer- Daniels-Midland Co. and JBS SA and helping drive global food prices lower in six of the past nine months.

"The crop is going to be big," said Hal Reed, the chief operating officer at Maumee, Ohio-based Andersons Inc., which owns terminals in seven states capable of storing 145 million bushels and produces 350 million gallons of ethanol from corn annually. "Conditions are looking very good right now. We will have lots of bushels to merchandise, more bushels to store, and cheaper corn for ethanol."

 

U.S. Harvest

 

Futures for delivery in December, after the harvest, fell 13 percent this year to $5.24 today on the Chicago Board of Trade. The Standard & Poor’s GSCI gauge of 24 commodities slipped 0.7 percent since the end of December, while the MSCI All-Country World Index of equities rose 8.6 percent. Treasuries lost 3.3 percent, a Bank of America Corp. index shows.

Stockpiles in the U.S. on Sept. 1, 2014, will reach 1.959 billion bushels, up from 729 million a year earlier and higher than the 1.895 billion bushels estimated by 22 analysts in a Bloomberg survey before the USDA report.

Hedge funds turned bearish last week for the first time since April 2010, U.S. Commodity Futures Trading Commission data show. The net-short position reached 19,943 futures and options, the most since February 2009. Speculators were net-long 98,380 contracts as recently as May 28.

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