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Corn Extends Longest Slump Since 1965

16:30PM Feb 14, 2013


By Jeff Wilson and Tony Dreibus, Copyright 2013 Bloomberg

Corn futures fell, capping the longest slump since 1965, as rain improved prospects for harvests in Brazil and Argentina and U.S. exports lagged behind year-earlier shipments. Soybeans and wheat also declined.

As much as 1.5 inches (3.8 centimeters) of rain will fall over the next seven days in Argentina, and 3 inches are forecast in southern Brazil, QT Weather said in a report today.

Corn prices retreated for the 10th straight session, the longest decline in 48 years. Combined output from Argentina and Brazil will jump 5.9 percent to a record 94 million bushels, the U.S. Department of Agriculture said Feb. 8. U.S. export sales for delivery before Sept. 1 are 53 percent lower than a year earlier, and heading for the smallest annual total since 1972, data show.

"The rains will assure record crops this year in South America," Mark Schultz, the chief analyst for Northstar Commodity Investment Co. in Minneapolis, said in a telephone interview. "Prices are not low enough to spur increased overseas buying of U.S. corn."

Corn futures for May delivery fell 0.1 percent to close at $6.9275 a bushel at 2 p.m. on the Chicago Board of Trade. Yesterday, the grain touched $6.855, the lowest for a most- active contract since Jan. 11.

Prices have fallen 18 percent from a record high of $8.49 on Aug. 10, following a drought that cut production for a third straight year in the U.S., the top exporter. Farmers probably will boost output to a record this year as weather returns to normal, the USDA said Feb. 11.

Larger supplies may reduce livestock-feed costs for pork producer Smithfield Foods Inc. and poultry processor Sanderson Farms Inc.

Ethanol Production

Weekly U.S. grain-based ethanol production declined last month to the lowest since June 2010. Brazil shipped $83.5 million of corn to the U.S. in January, compared with none a year earlier, the Trade Ministry in Brasilia said today.

Soybeans erased gains after the USDA reported that China canceled earlier U.S. purchases. U.S. exporters reported net sales reductions of 109,200 metric tons in the week ended Feb. 7, led by 230,600 tons postponed by China, the world’s biggest buyer and consumer of the oilseed.

"The Chinese sales cancellations are another indication that demand will shift to South American soybeans," Schultz said.

Soybean futures for May delivery dropped 0.4 percent to $14.085 a bushel in Chicago, the sixth decline in seven sessions. The price had risen as much as 0.4%.

Wheat Drops

Wheat fell for the third time in four days on speculation that rain and snow in Oklahoma and Texas will improve crop prospects. As much as six times the normal amount of precipitation has fallen in the panhandles of both states in the past week, National Weather Service data show.

"Earlier this week we saw snow in parts of Oklahoma and Texas, and that is beneficial," Tom Leffler, the owner of Leffler Commodities LLC in Augusta, Kansas, said by telephone. In Kansas, "we picked up an inch or 2 inches in some places, but it’s been very isolated. A lot of areas picked up nothing. It’s like putting a Band-Aid over a bleeding artery. It’s eased the drought, but it hasn’t stopped it."

Wheat futures for March delivery retreated 0.5 percent to $7.32 a bushel on the CBOT, after yesterday touching a seven- month low of $7.225.

Corn is the biggest U.S. crop, valued at $76.5 billion in 2011, followed by soybeans at $35.8 billion, government figures show. Wheat is the fourth-largest at $14.4 billion, behind hay.