Corn supply dropping most since 1995 signals rally

Farm Silos

While the USDA probably will increase its estimate for production in Brazil, the second-biggest exporter, by 400,000 tons, that will be more than offset by a 1.6 million-ton cut in the forecast for Argentina, the third-largest shipper, the medians of estimates from 22 analysts showed.

Stockpiles are getting harder to predict because growers are favoring silos on their farms for storage rather than commercial grain elevators, increasing the amount of data that must be collected. Storage on U.S. farms climbed 1.9 percent to 12.775 billion bushels in December 2011, the most since at least 1989, USDA data shows. It also raises the risk that prices could keep dropping as more bushels are added to inventory estimates.

Analysts and traders’ estimates for inventories on Dec. 1 missed the USDA tally by an average of 188 million bushels over the past six years, according to data compiled by Bloomberg. Futures moved by the maximum allowed by CBOT on the day of the USDA report in each year, evenly divided by gains and losses.

Corn averaged a record $6.89 in 2012 and that may spur farmers to plant more this year, easing concern about supply. U.S. production will expand to 14.83 billion bushels in 2013, 38 percent more than in the previous season, Informa Economics said in a report Dec. 19. The Memphis, Tennessee-based research company previously forecast 14.64 billion bushels.

Least Bullish

Domestic supply also may exceed analysts’ expectations because sales of cargoes for export before Sept. 1 fell 48 percent since Oct. 1, cutting the amount of grain that normally is in transit and not counted as inventory, according to USDA data. Hedge funds and other speculators cut bets on higher prices by 51 percent in the past four weeks and are now the least bullish since the end of June, U.S. Commodity Futures Trading Commission data show.

“I sold grains in September for significant profits,” said Jeffrey Sica, who helps oversee more than $1 billion of assets as the president and chief investment officer of Sica Wealth Management LLC in Morristown, New Jersey. “I anticipate buying again toward the end of the month.”

Prices will average $8.14 through Aug. 31, Hussein Allidina, the head of commodity research at Morgan Stanley in New York, wrote in a Jan. 8 report. Goldman, in a Dec. 5 report, forecast $8.25 in six months. Corn futures for delivery in March rose 0.4 percent to $6.9725 at 12:51 p.m. in Chicago.

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