Corn Heads Back to Bear Market as U.S. Rains Spark Reversal

July 5, 2016 01:50 PM

Corn futures are heading back to a bear market less than a month after entering bull territory as U.S. rains ease crop concerns and boost yield potential. November soybeans had the biggest-ever drop for the contract.

The southern third of the Midwest received extensive rains in the past four days, and northern areas are expected to get precipitation through Thursday, maintaining adequate soil moisture for crops, according to Joel Widenor, vice president at Commodity Weather Group LLC. In June, concerns over dry, hot weather had pushed soybeans to a fourth straight monthly gain and corn into a bull market.

“Rain this weekend provided timely relief,” Joe Camp, a risk management specialist at Bloomington, Illinois-based AgriVisor LLC, said in a telephone interview. “It is increasingly likely we will produce good crops. Demand will need to improve on this break to stabilize prices.”

Prices Tumble

Corn futures for September delivery dropped 3.7 percent to $3.4675 a bushel at 11:20 a.m. on the Chicago Board of Trade. The contract is down 22 percent from its recent closing high on June 17, meaning a settlement at that level would meet the common definition of a bear market. Rolling most-active futures are also poised to cross the threshold.

November soybean futures fell 5 percent to $10.81 a bushel on the CBOT. Prices dropped as much as 5.6 percent, a record intraday decline for the contract, which started trading in November 2012. The commodity fell as much as 64 cents, nearing the exchange limit of 65 cents.

In June, hedge funds and other money managers had loaded up on wagers for a corn rally. Some investors had speculated that U.S. farmers would choose to plant more soybeans instead of the grain after a rally for the oilseed. Instead, U.S. government data showed that growers sowed the third-biggest corn crop since World War II. The improving weather is also boosting the outlook for production as plants enter the pollination period.

Speculators are now backing away from their wagers on price gains. In the week ended June 28, a measure of combined holdings across corn, soybeans and wheat fell by 21 percent. The U.S. Department of Agriculture last week boosted its outlook for acreage of all three crops.

“We’re going into pollination for corn without a lot of stress,” Bill Gentry, a marketing consultant at Risk Management Commodities in Lafayette, Indiana, said in a telephone interview. “The funds kind of came into the market hoping for a real weather spook, and it’s dissipated.”

In other markets:

  • Soybean-meal futures for December delivery fell by the $20 exchange limit to $378 per 2,000 pounds on the CBOT.
  • Soft red winter wheat futures for September delivery dropped 1.6 percent to $4.2325 a bushel. The price touched $4.1575, the lowest for rolling most-active futures since April 2007.
  • Hard red winter wheat futures for September delivery fell 1.4 percent to $4.0575 a bushel. Prices earlier dipped below $4 for the first time for most-active futures in a decade.
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Spell Check

Burlington , IA
7/5/2016 05:38 PM

  Where is all this rain everyone is talking about!? Corn is wilting and soybeans are flipping. Half inch won't do shit at this point south east Iowa. Unbelievable

roachdale, IN
7/7/2016 01:21 AM

  I think the rain you are asking about must be in Indiana, we have had 4.5 inches in the last 30 days. Hope you get some soon.


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