Crop Prices Post Biggest Monthly Drop Since June on Seeding Gain

May 30, 2014 5:53 pm ET

May 30 (Bloomberg) -- A gauge of crops from corn to sugar posted the biggest monthly loss since June as sowing accelerated in the U.S. and supply concerns eased in Brazil.

Today, the Standard & Poor’s Agricultural Spot Index fell 0.7 percent to 389.58, capping the fifth straight weekly drop, the longest slump in four months. The measure dropped 8.1 percent in May. In the U.S., rain across the Great Plains boosted wheat, and farmers are forecast to collect record corn and soybean harvests. Money mangers are holding the fewest bullish bets on agriculture prices since February.

In the first four months of the year, crop prices jumped the most ever for the period as drought in Brazil threatened coffee, sugar and citrus supplies. Now, North American farmers are speeding up sowing, while rising coffee stockpiles in the U.S. cushion the impact of production losses.

“The weather is good, and people have gotten the crops in,” said Shonda Warner, the managing partner of Chess Ag Full Harvest Partners in Clarksdale, Mississippi, which oversees about $150 million. “It seems we’re going to have abundant harvests,” she said in a telephone interview from Chicago.

This week, the S&P GSCI Agricultural Index of eight crops dropped 2.1 percent 389.58, while the GSCI gauge of 24 raw materials, including energy and metals, fell 1.3 percent. In May, the broad measure fell 0.4 percent with coffee slumping 14 percent and wheat down 13 percent, the biggest declines for the individual commodities since September 2011.

Winter Wheat

Thirty percent of U.S. winter wheat was in good or excellent condition as of May 25, up from 29 percent the prior week, the Department of Agriculture said. Areas of Texas, Oklahoma and central Kansas received an inch (2.5 centimeters) of rain in the past week, government data show. Planting has accelerated Canada and Ukraine, and the USDA has forecast that world reserves will rise to a three-year high.

“Global grain supplies are on the rise, and that remains the biggest negative for the market,” Greg Grow, the director of agribusiness for Archer Financial Services Inc. in Chicago, said in a telephone interview. “There just are not any major weather problems developing.”

U.S. farmers planted 88 percent of the corn crop as of May 25, matching the five-year average pace, and soybean sowing was 59 percent complete, the USDA said May 27. Widespread rain in the next two weeks will boost soil moisture and crop development, according to T-Storm Weather LLC.

Arabica coffee dropped on speculation that global supplies will be enough to meet demand, even as a drought in the first quarter damaged plants in Brazil, the world’s top grower. Stockpiles of unroasted beans in the U.S., the biggest consumer and importer, rose 7.6 percent in April from a year earlier, the New York-based Green Coffee Association said May 15.

“Speculative buying interest in commodities is waning,” Sterling Smith, a futures specialist at Citigroup Inc. in Chicago, said in a telephone interview. “We’re looking at a very large corn crop and potential record soybean supplies. Combine that with spectacular weather, and it creates pressure.”