Corn boom goes bust with U.S. sales in record drop

Hedge Funds

Hedge funds and other large speculators cut bets on higher corn prices by 51% in the week ending April 2, the biggest reduction since June 2010, U.S. Commodity Futures Trading Commission data show.

Growing conditions across the Midwest are improving after snow and rain increased soil moisture, according to data from the U.S. Drought Monitor. About 20% of the nine-state region on April 2 was classified with severe to exceptional drought, compared with 30% on Jan. 1 and 50% at the end of August. Drought conditions will ease through June 1 in the western Midwest, Great Plains and parts of the Southeast, according to the U.S. Climate Prediction Center.

The USDA predicted Feb. 22 that domestic cash prices would average $4.80 this year. With cash corn for December delivery fetching around $5 now, buyers may pay less than $4 by December, according to Fray at West Central Cooperative, which has 28 storage facilities in Iowa, the top U.S. grower.

Unkind Markets

The drop in prices has made some farmers reluctant to sell. Only about 2% of the 2013 crop has been sold in advance of the harvest, down from 20% on average in the past five years, probably because they are counting on a weather-driven rally similar to the previous three years, Fray said.

“There is no reason for consumers or investors to be anxious about running out of supplies,” said Dale Durchholz, the senior market analyst for AgriVisor LLC in Bloomington, Illinois. “When farmers and investors are hoping for a rally to sell, the market usually isn’t that kind.”

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