Corn bulls retreat as near-record costs curb demand

Northern Kansas

Freezing temperatures as far south as central Nebraska and northern areas of Iowa and Illinois on Sept. 17, 18 and 21 may reduce the quality of corn kernels, said Drew Lerner, the president of World Weather Inc. in Overland Park, Kansas. Winds gusting up to 35 miles an hour may cause some drought-weakened corn plants to fall over, reducing yield potential, he said.

Prices may have to rise further before consumption is constrained, Damien Courvalin, an analyst at Goldman Sachs Group Inc. in New York, wrote in a report Sept. 12. The bank expects corn to trade at $9 in three months before retreating to $7.50 in 12 months. Crop conditions in the U.S. are the worst since 1988, with the harvest about 15 percent complete as of Sept. 9, USDA data show.

Hedge funds are still near their most bullish in about a year, according to U.S. Commodity Futures Trading Commission data. While they cut their net-long position, or bets on higher prices, by 8 percent in the week ended Aug. 28, they increased them again by 2.6 percent the following week. They are now holding a net 323,629 futures and options, compared with a six- year average of 185,000 contracts, the data show.

Exports Canceled

China’s imports may fall to 1 million tons in 2013, from 5.5 million tons this year, because of record prices, state- owned researcher Grain.gov.cn said in a Sept. 13 report. Importers from China canceled contracts, with weekly U.S. sales to the Asian nation showing net cancellations at least four times since July, the USDA data show. China is the world’s second-biggest consumer of corn after the U.S.

Rising prices are also curbing demand from biofuel producers. U.S. ethanol production slid to the lowest level since the end of July in the week ended Sept. 7, Energy Department data show. Producers are losing about 41 cents on each gallon of ethanol, based on fuel and corn contracts for December, according to data compiled by Bloomberg. More U.S. corn went to make ethanol than livestock feed in 2010-11 for the first time ever.

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