US corn hits 4-year low on crop outlook

Agricultural , Brazil , Commodities , Corn , USA Jul 22, 2014 No Comments

CornGlobal output of raw corn futures for December delivery fell 1.7 percent to close at $3.72 a bushel on the Chicago Board of Trade. Earlier, the price touched $3.705, the lowest for a most-active contract since July 14, 2010. The price has dropped 26 percent in the past 12 months.

“The growing season continues in nearly perfect form here in the U.S. and in much of Canada,” economist Dennis Gartman wrote in his newsletter. “This relentless bear market shall not end until the nation’s farmers have sold their crops.”

Weather news continues depressing crop futures. After firming at mid-week, the corn market turned downward Friday and resumed its slide Sunday night. Those losses large reflect forecasts for near-ideal Corn Belt weather, with current heat being followed by more mild, wet conditions. Bulls may have a hard time sustaining a bounce unless conditions deteriorate. September corn fell 4.75 cents to $3.665/bushel early Monday morning.

“The U.S. Department of Agriculture’s planted acreage report, which was released June 30, did not help the corn market,” Brian Williams, agricultural economist with the Mississippi State University Extension Service, said. “Then, the quarterly grain stocks report came out the same day indicating more corn in storage than anticipated. A week later, the world agricultural supply and demand estimates report suggested a drop in feed use and higher ending stocks. Those two reports really made prices tumble.”

“Another driver is the crop condition, released by USDA every Monday. Both Mississippi and the national crops are in very good condition. Currently, they are projecting the second largest crop nationally, just behind last year’s record,” he said.

The U.S. Department of Agriculture said earlier in the month that U.S. corn inventories at the end of August will total 1.246 billion bushels, up 8% from its forecast in June. According to the agency, nearly 76% of the U.S. corn crop was rated “good” to “excellent” as of last week, the highest rating for this time of year since 1994.

“The majority of today’s trade remains focused on the near-perfect growing conditions for the U.S. crops,” said Karl Setzer, market analyst at the MaxYield Cooperative in West Bend, Iowa. “While we are seeing elevated temperatures in the Midwest today and tomorrow, conditions moderate considerably by the weekend.”

University of Missouri Extension agricultural economist David Reinbott told the 2014 Summer AgMarketing Outlook Conference that prices are likely to remain low, with projected record global corn crops. Ending stocks of corn are projected to be 190 million metric tons worldwide.

“I think that is really going to keep the lid on corn prices unless we see some production problems either in South America or China,” Reinbott says. “We’ve got fairly good demand, but there is a lot of corn on the supply side.”

In Brazil, low corn prices following a bumper crop are worrying farmers but providing favorable margins for an incipient corn-ethanol industry, said the manager of Usimat, the first Brazilian mill to produce the corn-based biofuel.

Usimat, located in a remote, corn-producing part of Mato Grosso state in central Brazil, plans to increase corn-based ethanol output to 100,000 tonnes this year from 67,000 tonnes last year.

Other corn-ethanol projects are being studied in Mato Grosso. Specialists say corn-based ethanol is only profitable in remote areas of Brazil, far from the heart of the sugarcane country in Sao Paulo state.

Brazil produced a record 81.5 million tonnes of corn last year but production is expected to fall below 80 million tonnes this year due in part to low prices.

Pascal Blanc

Pascal has implemented numerous software solutions in the areas of procurement, sourcing, spend management, supplier evaluation and performance. His clients include Fortune 500 companies in Europe, Asia and North America. He is a co-founder of Source & Procure.

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