Corn Falls to 40-Month Low, Wheat Drops on Global Supply Outlook

Jan 08, 2014 5:15 pm ET

Jan. 8 (Bloomberg) -- Corn futures tumbled to a 40-month low and wheat fell to the cheapest since 2011 on speculation that a U.S. government report this week will show ample world supplies. Oilseeds also slumped.

Inventories of corn in the season ending Oct. 1 probably will rise to 163.08 million metric tons, the highest since 2001, and U.S. winter-wheat planting climbed to a six-year high, according to Bloomberg surveys before the Department of Agriculture’s report on Jan. 10. Canadian Canola futures extended a slump to the lowest since August 2010, and soybeans in Chicago dropped.

Gains in food costs around the world have slowed as record harvests from India to the U.S. and Brazil bolstered supplies and sent corn, soybeans and wheat into bear markets. In 2013, the Standard & Poor’s GSCI Agriculture Index of eight crops tumbled 22 percent, the most since 1981.

“The weakness is a realization that supplies are getting bigger,” Brian Grete, the senior market analyst at Professional Farmers of America in Cedar Falls, Iowa, said in a telephone interview. “There’s a real malaise developing in the market.”

Corn futures for March delivery declined 2.1 percent to close at $4.17 a bushel at 1:15 p.m. on the Chicago Board of Trade, the biggest drop since for a most-active contract since Nov. 18. Earlier, the price touched $4.14, the lowest since Aug. 12, 2010.

Wheat futures for March delivery in March slumped 2.3 percent to $5.8875 a bushel. The price touched $5.8675, the lowest since Dec. 19, 2011. Global supplies will rise 3.9 percent to 182.68 million tons from a year earlier, according to the Bloomberg survey.

Dollar’s Rally

The decline in futures accelerated as the dollar climbed to a four-month high against a basket of 10 major currencies, eroding the appeal of U.S. exports.

The greenback climbed after the minutes of the Federal Reserve’s last meeting showed officials cited diminishing benefits from monetary stimulus and the potential of “excessive risk-taking in the financial sector.”

The Standard & Poor’s GSCI Spot Index of 24 raw materials fell as much as 1.2 percent to a two-month low.

“Commodities are out of favor with investors” because of the Fed’s decision and rising global supplies, Terry Reilly, the senior commodity analyst at Futures International LLC in Chicago, said in a telephone interview.

Canola futures for March delivery fell 1.6 percent to C$430.10 ($397.84) a ton on the ICE Futures Canada. The price touched C$430, the lowest since Aug. 13, 2010.

Production in Canada, the world’s largest grower, may climb 29 percent to 18 million tons, surpassing the record output of 14.6 million in 2011, the government has forecast. Canola and soybeans are used in cooking oil.

In Chicago, soybean futures for March delivery dropped 0.5 percent to $12.6925 a bushel in Chicago. Global reserves will rise 19 percent to 71.46 million tons from a year earlier on increasing supplies in South America, another Bloomberg survey showed.

--With assistance from Jen Skerritt in Winnipeg. Editors: Patrick McKiernan, Steve Stroth