Corn Plunges 5.1% as U.S. Farmers Plan Most Acres Since 1944
Corn Plunges 5.1% as U.S. Farmers Plan Most Acres Since 1944
By Jeff Wilson
March 30 (Bloomberg) -- Corn prices fell the maximum allowed by the Chicago Board of Trade after a government survey showed U.S. farmers plan to sow 15 percent more grain this spring, the most since 1944 and above analysts' estimates.
Corn acres will rise to 90.4 million acres, the U.S. Department of Agriculture said. Twenty-two analysts surveyed by Bloomberg projected a gain of 12 percent to 87.9 million. Output may rise 18 percent to 12.4 billion bu****s, boosting supplies of livestock feed for meat companies such as Tyson Foods Inc. and grain for ethanol maker Archer Daniels Midland Co.
``The increase in corn acreage means farmers could produce a record crop, enough to satisfy demand and rebuild global inventories,'' said Greg Grow, director of Agri-Business for Archer Financial Services Inc. in Chicago.
Corn futures for May delivery fell 20 cents, or 5.1 percent, to $3.745 on the Chicago Board of Trade, the biggest percentage drop since Aug. 11. Prices have fallen 17 percent from a 10-year high of $4.5025 on Feb. 26. They dropped 7.1 percent this week and 4 percent in the first quarter,
The exchange limits daily gains and losses to 20 cents a bu****.
Soybean prices dropped even after the government said plantings may fall 11 percent to 67.1 million acres, more than the 8.4 percent drop estimated by analysts.
``A record global supply'' should provide a cushion against shortages, Grow said.
More Corn
Soybean futures for May delivery fell 17 cents, or 2.2 percent, to $7.6125 a bu**** in Chicago. Prices reached $8.0775 on Feb. 22, the highest since June 2004, on speculation that U.S. farmers would plant less of the crop, opting for more- profitable corn. Prices fell 1.1 percent this week and 9.2 percent this quarter.
Farmers can earn as much as $200 per acre more from corn than soybeans.
Corn is the biggest U.S. crop, valued at a record $33.8 billion in 2006, with soybeans in second place, at $19.7 billion, government figures show.
The ``plantings report sets the stage for a rebuilding of depleted corn inventories and a subsequent reduction in corn prices during the fall of 2007,'' David Driscoll, an analyst for Citigroup Global Markets in New York, said in a report today.
Driscoll reiterated his buy recommendation for Archer Daniels Midland, the world's biggest ethanol producer, which forecast corn prices will to fall to $3 a bu**** in the fourth quarter.
Shares Drop
Shares of Decatur, Illinois-based Archer Daniels fell 6 cents to $36.70 in New York Stock Exchange Composite trading. They have gained 8.3 percent in the past year.
The slump in corn prices was exaggerated by selling from commodity and hedge funds, said Shawn McCambridge, senior grain analyst for Prudential Financial Inc. in Chicago. There were more than 47,000 May futures to sell at limit down prices on the exchange's electronic trading platform at the close, according to Bloomberg data from the exchange.
Large speculators, who must report positions to the Commodity Futures Trading Commission, held 321,903 more long positions than short positions on March 20. Net-long positions reached a record 395,081 contracts on Feb. 27 after corn prices hit the 10-year high.
``It's a big money game, and the funds are dumping losing positions,'' said Jerry Gidel, a market analyst for North American Risk Management Services Inc. in Chicago. ``The implied option premiums at the close suggest prices cold fall another 10 to 14 cents'' when trading resume April 1 on the electronic trading platform, Gidel said.
South American Soybeans
Soybean farmers in Brazil and Argentina, the two biggest producers after the U.S., will harvest a combined 101 million metric tons (3.71 billion bu****s) and raise global inventories on Sept. 30 to a record 57.5 million tons, according to a USDA report on March 9.
Brazil's soybean crop will rise to a record 57 million tons, topping a February estimate of 56 million tons and the 55 million tons harvested a year ago, the USDA said.
Argentina's soybean production was estimated to rise 8.6 percent to 44 million tons from last year's crop of 40.5 million tons.
``The South American crops are getting even bigger so there is a large cushion of supplies to meet demand,'' Grow said.
Cotton prices fell in New York, snapping a six-session rally, on concern China may reduce purchases from the U.S. should an international trade rift escalate.
Cotton futures for May delivery fell 0.62 cent, or 1.1 percent, to 53.57 cents a pound on the New York Board of Trade. Prices have dropped 4.7 percent this year as a U.S. surplus grows and exports, especially to China, lag behind last year's trade.
A futures contract is an obligation to buy or sell a commodity at a set price for delivery by a specific date.
To contact the reporters on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net
