The best rally for corn prices in 10 months meant U.S. farmers were frantic to sell from the mountain of grain they’d been hoarding.
Growers have been stockpiling supplies following a string of bumper harvests, waiting patiently for a rebound in prices. Their hopes have finally been answered after dry weather threatened crops in Brazil, sending futures traded in Chicago to their highest in nine months. With more than 50 percent of U.S. corn stockpiles stashed on farms as of March, the unexpected price gains had resulted in “quiet brisk” sales and deliveries, Bunge Ltd. Chief Executive Officer Soren Schroder said in a telephone interview.
“We had a couple of days of very strong farmer selling,” Juan Luciano, the CEO of Chicago-based Archer-Daniels-Midland Co., said on a call with analysts on Tuesday.
When corn was trading near $3.50 a bushel in the beginning of April, the market was looking “bleak” and farmers held onto the old crop, said Joe Lardy, a research manager for farmer cooperative CHS Inc.’s hedging unit in Inver Grove Heights, Minnesota. By the middle of the month, prices had topped $4 for the first time since July, reaching the “magic” level that “triggered a lot of activity,” he said.
Corn futures for July delivery were down 0.9 percent at $3.7625 a bushel at 6:10 a.m. in early trading on the Chicago Board of Trade. The most-active contract jumped 11 percent in April, the biggest gain since June. The pace of farmer selling was slower last week as prices declined, Lardy said.
While the sales will be welcome to traders who will be able to more fully utilize networks of elevators, terminals and other assets to get grain moved and delivered, the recent pickup probably isn’t enough to reverse the slump that hit the agriculture industry amid a rout for crop prices. Corn, wheat and soybean futures in Chicago have declined for three straight years because of excess global supplies.
ADM, which has 70 percent of its global long-term assets in the U.S., is “less optimistic” in 2016 about its agricultural-services segment, which buys, sells and stores commodities, Luciano said on the call Tuesday. The company reported weaker-than-expected earnings in the first quarter after its international trading desk booked a loss and as U.S. grain-export volumes shrank.
Farmers also have been “restrained” in their selling, hoping that prices will go even higher, Lardy of CHS said.
While holdings of futures and options show that “there was a significant change of ownership from farmers to speculators during this rally,” activity in cash markets signal that growers still have more bushels to sell, said Doug Schultz, the chief operating officer of John Stewart & Associates in St. Joseph, Missouri.
Farmer Howard Haas, who serves as chairman of the board for the MaxYield Cooperative in Iowa, last month made his first sale since January after prices rose. Through the end of January, Haas had sold about 30 percent of his 2015 corn harvest and in the last two weeks of April he sold another 50 percent to be delivered over the next few months, he said. Still, he hasn’t contracted any of the corn crop he’ll harvest later this year.
“I was expecting it to get better sometime but you just never know when, and if it’s going to happen,” Algona, Iowa-based Haas said. “I do feel lucky. It’s still not great prices.”