Corn turns bearish as rain revives U.S. crops

Illinois Counties

Yields may average 190 to 200 bushels an acre in the central Illinois counties from 148 in 2012 and the 10-year average of 182.9 bushels, said Kim Craig, the head grain merchandiser for Deer Creek, Illinois-based Bell Enterprises Inc., which owns four storage facilities.

The record U.S. crop will help boost global production 12% to 962.58 million tons, while consumption expands 8.3% to 935.06 million tons, the USDA said June 12. Stockpiles will jump 23% to 152.36 million tons in the year that starts Oct. 1, the highest since 2001, according to the estimates in the Bloomberg survey.

After three years of prices above $5, or 63% more than the average over the previous decade, farmers boosted output in Argentina, Brazil, Ukraine, Europe and Canada.

Profit Boost

Ample corn supplies will help boost profit in grain handling and ethanol production for Decatur, Illinois-based ADM. Shares of the company rose 31% to $35.90 in New York trading this year. ADM will report a 12% gain in profit to $1.56 billion this year, according to the mean of six analyst estimates compiled by Bloomberg.

Lower grain prices will help JBS, the Sao Paulo-based meat producer whose businesses include the Pilgrim’s Pride Corp. poultry unit. Feed should cost “much less” in the U.S., Chief Executive Officer Wesley Mendonca Batista said in a conference call in May.

The United Nations’ cereal-price index dropped in eight of the past nine months, declining 10% since September. Global food costs are now 11% below the record they reached in February 2011.

“Markets that go high and stay high too long will endure a longer trough in prices to reach equilibrium,” said Michael Swanson, a senior agricultural economist in Minneapolis for Wells Fargo & Co., the largest U.S. farm lender. “It’s going to take a couple of years of $4 to $4.50 corn to knock this market back to reality.”

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