Corn falls to five-month low on signs of slowing ethanol demand

Corn futures tumbled to a five-month low after the government said production of ethanol fell and inventories rose last week.

Production of ethanol in the U.S., mostly from corn, fell 13 percent in the week ended Dec. 14 from a year earlier, the Department of Energy said today in a weekly report. Stockpiles last week rose to the highest since June and were up 18 percent from a year earlier. Ethanol producers are losing as much as 25 cents a gallon on the fuel, according to Northstar Commodity Investments Inc. About 42 percent of this year’s domestic crop will be used to make ethanol, the government estimates.

“Ethanol production is slowing, and inventories are still rising, a negative combination,” Mark Schultz, the chief analyst for Minneapolis-based Northstar, said in a telephone interview. “Corn demand is slowing.”

Prices had surged as much as 68 percent since mid-June as the worst U.S. drought in more than five decades damaged the crop, reducing the harvest by 13 percent to the lowest in six years. Corn reached a record $8.49 a bushel in Chicago on Aug. 10. The increase boosted costs for ethanol makers and meat producers, reducing demand, while encouraging farmers to consider planting more of the grain next year.

Corn futures for March delivery declined 2.4 percent to close at $7.03 a bushel at 2 p.m. on the Chicago Board of Trade, after touching $7.015, the lowest for a most-active contract since July 11. The grain still is up 8.7 percent this year.

Sanderson Farms Inc., the fourth-largest U.S. chicken producer, said yesterday in a conference call with analysts that it plans to reduce output by 1.1 percent in 2013 because of high feed costs. Total red-meat and poultry production will fall 2.6 percent to 90.04 billion pounds in 2013 from a year earlier, the U.S. Department of Agriculture said on Dec. 11.

Planting Boom

High prices probably will encourage farmers to plant more corn in 2013, boosting demand for fertilizer from CF Industries Holdings Inc., Potash Corp. of Saskatchewan Inc. and Agrium Inc.

U.S. farmers will sow 99.026 million acres next year, up 2.1 percent from this year and the most since 1935, Memphis- based researcher Informa Economics Inc. said today in a report to clients. Production of corn, sorghum, barley and oats will jump 38 percent to 392.9 million tons next year from 284.1 million this year, Informa said.

“The acreage number is obviously bearish,” Doug Bergman, a vice president for RMC Asset Management in Chicago, said in an e-mail.

Soybeans Decline 

Soybean futures for March delivery dropped 2 percent to $14.31 a bushel on the CBOT, after touching $14.2625, the lowest since Nov. 27. The price is up 18 percent this year after the U.S. drought triggered concern that supplies will fall short of increasing demand from China.

Rain may boost Brazilian soybean production to 81.5 million metric tons in the marketing year that begins Feb. 1, up from 81.3 million forecast in November and 67.7 million harvested this year, the soybean processors group Abiove said today. The USDA predicts Brazil will surpass the U.S. as the top producer and exporter of the crop.

Frequent rain during the next two weeks from Paraguay to central Brazil will maintain favorable conditions for flowering plants, World Weather Inc. said in a report today. Yesterday, U.S. exporters said 420,000 tons of soybeans registered for delivery before Sept. 1 were canceled, including 300,000 tons to China.

“Harvest will ramp up by the middle of January in Brazil, and that will slow demand” for U.S. soybeans, Charles Sernatinger, a vice president at ABN Amro Clearing Inc. in Chicago, said in a telephone interview. “U.S. soybeans appear to be overpriced, and the Chinese seem to agree.”

Corn is the biggest U.S. crop, valued at $76.5 billion in 2011, followed by soybeans at $35.8 billion, government figures show.




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