Corn Heads for Bear Market After U.S. Stockpiles Beat Estimates

07:39AM Apr 01, 2013
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April 1 (Bloomberg) -- Corn headed for a bear market, falling by the most since mid-June, after the U.S. government reported that stockpiles were larger than estimated and acreage may expand to the highest since 1936. Wheat slumped to the cheapest since June and soybeans fell to an 11-week low.

The May-delivery contract lost as much as 6.3 percent to $6.515 a bushel, the lowest level since July 2, on the Chicago Board of Trade, and was at $6.535 at 5:13 p.m. in Singapore. On March 28, prices plunged by the 40-cent limit to settle at $6.9525 after the U.S. Department of Agriculture issued the stockpiles data and forecasts for 2013 plantings.

Lower grain prices may further erode global food costs that fell for a fifth month in February, according to a gauge compiled by the United Nations’ Food & Agriculture Organization. Corn has plunged 22 percent since the close on Aug. 21, meeting the definition used by some investors to identify bear-market territory. The U.S. is the largest corn grower and shipper.

"Prospects of increasing corn plantings and inventories in the U.S. hurt market sentiment," said Makiko Tsugata, an analyst at research company Market Risk Advisory in Tokyo. Feed demand in U.S. has declined, while U.S. shipments also dropped as Brazil expanded its export markets, she said.

Inventories on March 1 totaled 5.399 billion bushels in the U.S., the USDA said March 28. While that’s down 10 percent from 2012 and a nine-year low, analysts had expected 4.995 billion. Farmers will sow 97.282 million acres, up from 97.155 million in 2012 and the most in 77 years, the USDA said.


Record High


Corn rallied to an intraday record of $8.49 a bushel on Aug. 10 as the worst U.S. drought since the 1930s scorched crops, prompting farmers in South America to boost supplies. Corn in Chicago, which reached a closing high of $8.3875 a bushel on Aug. 21, has dropped for seven of the past eight months.

The daily trading limit for corn futures and options was widened to 60 cents a bushel from 40 cents, the exchange said in a statement. Corn is the most valuable U.S. crop, followed by soybeans, hay and wheat, USDA data show.

Global food costs tracked by the Rome-based FAO stood at 210.18 at the end of February, according the agency’s 55-item index. They’ve lost 12 percent since reaching a record in February 2011. Corn is used in animal feed.

Wheat for May delivery fell as much as 1.8 percent to $6.755 a bushel in Chicago, the lowest level since June 22. The price, which dropped 6.7 percent on March 28, was at $6.78.

Soybeans for May delivery declined as much as 1 percent to $13.9125 a bushel, the lowest level since Jan. 14, and were at $13.915.


--Editors: Jake Lloyd-Smith, Thomas Kutty Abraham


To contact the reporters on this story: Supunnabul Suwannakij in Bangkok at [email protected]; Chanyaporn Chanjaroen in Singapore at [email protected]


To contact the editor responsible for this story: Jake Lloyd-Smith at [email protected]