Grain Prices Due for 'Dead Cat' Bounce

12:00PM Jul 03, 2014
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Corn traded near the lowest in almost six months and was on the verge of a bear market amid expectations farmers will produce a record crop in the U.S., the world’s largest grower and exporter.

Corn may join wheat in a bear market as global grain stockpiles rise, helping curb world food costs while crimping farmers’ incomes. Prices fell this week after USDA said domestic inventories of the most- valuable U.S. crop were bigger than expected. Goldman Sachs Group Inc. forecasts a retreat to $4 in six months.

"Grain prices have plunged and they are more than due for a bounce," economist Dennis Gartman wrote in his newsletter. "It shall be of the proverbial ‘dead cat’ variety however, we fear, for the corn and soybean crops are huge and growing larger by the week."

Soybean Acreage Shocks Trade

Power Hour Noon LogoCorn for December delivery added 0.1 percent to $4.1825 a bushel on the Chicago Board of Trade by 7:53 a.m. local time. Prices fell to as low as $4.1625 yesterday, the lowest level for a most-active contract since Jan. 10, and are down 6.5 percent this week. Corn dropped 19.8 percent from the April 29 close to yesterday, nearing the 20 percent drop that commonly defines a bear market.

World grain production will be larger than expected a month ago, the United Nations’ Food & Agriculture Organization wrote in a forecast today. Supply will outpace demand, lifting grain ending stocks to 604.1 million metric tons by the end of the season, rising from 573.9 million tons a year earlier and the highest since 2001, the FAO said.

Higher Stockpiles

"The market is bearish," said Avtar Sandu, senior commodities manager at Phillip Futures Pte in Singapore. "The U.S. crop is growing very well," and stockpiles were much higher than analysts expected, he said.

U.S. corn stockpiles were 3.85 billion bushels at the start of June following a record 2013 crop, the USDA said on June 30. That topped the average estimate of 3.72 billion bushels in a Bloomberg survey of 26 analysts. The U.S. harvest will reach 13.935 billion bushels this year, it said last month.

Chicago trading is scheduled to halt early today ahead of tomorrow’s Independence Day holiday.

"The markets are taking a break ahead of a long weekend in the U.S.," Paris-based farm adviser Agritel wrote in a market comment. "Weather conditions remain extremely favorable for corn, because the abundant rains recently won’t displease this water-hungry crop."

Wheat for September delivery gained 0.4 percent to $5.78 a bushel. Futures touched $5.675 on June 30, the lowest since Feb. 7. Milling wheat for November delivery traded on Euronext in Paris rose 0.1 percent to 184.50 euros ($251) a ton.

Soybeans for delivery in November advanced 0.3 percent to $11.4525 a bushel, breaking four days of losses. The oilseed fell to $11.32 on July 1, the lowest since December 2011.

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