Funds make record bearish corn bets on supply

U.S. farmers are poised to reap their biggest-ever corn (CBOT:CU13) crop, expanding global stockpiles to the most in 13 years and spurring hedge funds and other speculators to make record bets that prices will keep slumping.

The harvest in the largest grower will jump 30% to 14.036 billion bushels (356.5 million metric tons), the average of 27 analyst estimates compiled by Bloomberg shows. That’s 53 million bushels more than they expected a month ago and 86 million above the government’s July forecast. Record crops from the U.S. to Brazil to Ukraine will expand world inventories by 23% to 152.36 million tons in a year, according to the average of 12 predictions.

Surging supply spurred analysts from Goldman Sachs Group Inc. to cut their price forecasts this week and R.J. O’Brien & Associates in Chicago, the U.S. grain-trading hub, says futures may drop as much as 24% to $3.50 a bushel this year. Speculators turned bearish a month ago for the first time since 2010 as crops recover from last season’s drought and farmers planted the most acres since 1936.

“We are going to switch from wind blowing through empty grain bins to piles of corn laying on the ground,” said Diana Klemme, a vice president at Grain Service Corp., an adviser and broker in Atlanta. “It is possible to see sub-$4 corn,” a price last seen in 2010, she said.

Billion Bushels

Futures dropped 34% to $4.58 on the Chicago Board of Trade this year, reaching a 34-month low of $4.55 on Aug. 6. Corn is the biggest decliner in the Standard & Poor’s GSCI Spot Index of 24 commodities, which retreated 3.3%. The MSCI All-Country World Index of equities rose 11% and the Bloomberg U.S. Treasury Bond index lost 2.6%.

Goldman’s analysts lowered their three-month forecast to $4.25 from $4.75 in a report Aug. 6 and said U.S. production would probably reach 14.138 billion bushels as yields rebound 30% to the second-highest ever. Analysts at Rabobank International last month cut their first-quarter forecast to $4.40 from $4.80 in June.

The U.S. Department of Agriculture updates its estimates for global crop production, demand and stockpiles at noon in Washington on Aug. 12.

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