Funds make record bearish corn bets on supply

Lower Prices

“A 14 billion-bushel crop is a foregone conclusion,” said John Cory, the chief executive officer of Prairie Mills Products LLC, a grain processor in Rochester, Indiana. “There is no reason to be in a hurry to buy corn. I’m not the only consumer that will wait for lower prices.”

ADM, which makes animal feed, sweetener and ethanol, is “optimistic” about margins in 2014 and 2015 because of rising corn supply, Chief Operating Officer Juan Luciano said on a conference call Aug. 6. Shares of the Decatur, Illinois-based company jumped 38% this year.

Tyson Foods will report a 37% gain in profit to $797.6 million this year according to the mean of eight analysts estimates compiled by Bloomberg. Shares of the Springdale, Arkansas-based company rose 58% this year. Tyson handled an average of 41.4 million chickens, 403,000 hogs and 132,000 head of cattle last year, data on its website show.

Corn production is also rising around the world after prices averaged a record $6.8894 last year, compared with about $3.62 over the previous decade. Output outside the U.S. will advance 4.2% to an all-time high of 605.5 million tons, the USDA estimates. China, Argentina and Ukraine are among those the department expects to reap the most grain ever.

Farmland Costs

U.S. farmers earned more than $112 billion in each of the past two years, and the USDA is anticipating a record $128.2 billion in 2013. That also boosted the price of farmland in Illinois, Iowa, Indiana, Missouri and Ohio by 79% since 2009, the department estimates. Declining grain prices are curbing cash returns and diminishing sales of cropland, said Jim Farrell, the president of Farmers National Co. in Omaha, which manages farms in the Midwest.

“In commodities the price pendulum swings to extremes,” said John Setterdahl, the senior vice president for grain marketing and logistics at FC Cooperative Co. in Ames, Iowa, the largest farmer-owned cooperative in the state. “Last year the pendulum swung to a record high. It may go lower than people expect this year.”

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