Corn futures slump into bear market on U.S. inventory, planting

Corn futures headed for a bear market, falling to the lowest price since July, on signs of ample supplies in the U.S., the world’s top grower and exporter. Wheat reached a nine-month low, and soybeans tumbled.

Farmers will plant 97.282 million acres of corn this year, the most since 1936, and inventories on March 1 were 8.1% bigger than analysts forecast, the U.S. Department of Agriculture said on March 28. Prices in Chicago are down 21% since last year’s closing high on Aug. 21, meeting the definition used by some investors to identify a bear market.

After last year’s drought cut output by 13% and sent prices to a record high, demand slowed as high grain costs forced livestock producers including Cargill Inc. to close beef plants while ethanol producers including Poet LLC shut distilleries. Lower prices may further erode global food costs that fell for a fifth month in February, according to a gauge compiled by the United Nations’ Food & Agriculture Organization.

“Prospects of increasing corn plantings and inventories in the U.S. hurt market sentiment,” said Makiko Tsugata, an analyst at research company Market Risk Advisory in Tokyo. Feed demand in U.S. has declined, while U.S. shipments also dropped as Brazil expanded its export markets, she said.

Corn futures for May delivery fell 4.5% to $6.6425 a bushel at 7:48 a.m. on the Chicago Board of Trade, after reaching $6.515, the lowest for a most-active contract since July 2. On March 28, prices plunged by the 40-cent limit after the USDA report.

Domestic inventories on March 1 totaled 5.399 billion bushels, the government estimates. While that’s down 10% from 2012 and a nine-year low, analysts had expected 4.995 billion. Planting will rise from 97.155 million in 2012, the USDA said.

Record High

Corn rallied to an intraday record of $8.49 on Aug. 10 as the worst U.S. drought since the 1930s scorched crops. Since then, farmers in South America have boosted output, and Midwest farmers are planning to expand production. Corn, which reached a closing high of $8.3875 on Aug. 21, has dropped for seven of the past eight months.

The daily trading limit for corn was widened to 60 cents, the exchange said in a statement. The crop is the most-valuable in the U.S., followed by soybeans, hay and wheat, government data show.

Global food costs tracked by the Rome-based FAO stood at 210.18 at the end of February, according the agency’s 55-item index. They’ve lost 12% since reaching a record in February 2011. Corn is used in animal feed.

Wheat futures for May delivery fell 1.2% to $6.7975 a bushel in Chicago, after reaching $6.755, the lowest for a most-active contract since June 22. The price dropped 6.7% on March 28.

Soybean futures for May delivery declined 1% to $13.9125 a bushel on the CBOT, after reaching $13.8625, the lowest for a most-active contract since since Jan. 14.

Bloomberg News

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