Corn, Soybeans May Fall as Dry Weather Speeds U.S. Harvests
02.10.2010, 09:55
Corn prices may fall for the first time in four weeks and soybeans may decline as warm, dry weather in the Midwest allows U.S. farmers to accelerate harvesting.
Budapest hotels - Budapest Hotel Booking
Thirteen of 25 farm advisers, grain merchants and traders surveyed Oct. 6 recommended selling corn, which reached an 11- week high last week. Fifteen respondents said to sell soybeans, which rose 3 percent last week, the most since mid-June.
The Midwest harvest had been slowed in some areas by rains that left fields too muddy for heavy machinery, limiting supplies. Warm, dry weather last week allowed farmers to resume work on collecting what the government says will be the second- biggest crops on record.
It's harvest, and storage space is filling up,'' forcing farmers to sell more to grain elevators, ethanol producers and processors, said Phyllis Nystrom, a market analyst for Country Hedging Inc. in Inver Grove Heights, Minnesota.
Corn futures for delivery in December rose 8.5 cents, or 3.2 percent, to $2.71 a bushel last week on the Chicago Board of Trade. Prices have gained 33 percent in the past year on increased exports of animal feed and record demand for corn-based ethanol. Soybeans for November delivery rose 16.5 cents to $5.64 a bushel last week in Chicago. Prices are little changed from a year ago.
Surprising Gain
Last week's gain in corn and soybeans surprised the majority of respondents surveyed Sept. 29, who had expected declines. Both surveys have been right 56 percent of the time since they began. The corn survey started April 26, 2004, and soybeans began six weeks later.
Prices may also fall on speculation the U.S. Department of Agriculture on Oct. 12 will raise its production estimate because of late-summer rains, some analysts said. Since 1965, the USDA has increased its estimate of corn yields 27 times from September to October. The soybean forecast was raised 18 times.
The government on Sept. 12 said the corn crop will be 11.1 billion bushels and soybean production will total 3.09 billion. If realized, the harvests would boost combined inventories to a record 16.7 billion bushels, the USDA said.
Joel Karlin, commodity sales coordinator for Western Milling in Goshen, California, said the U.S. will raise its corn forecast 0.8 percent to 11.201 billion bushels and lift the soybean forecast 5.1 percent to a record 3.252 billion.
Storage Pressure
The accelerated harvest may put pressure on farmers to sell crops they are unable to put in storage. The USDA announced Oct. 4 that farmers will be able to use temporary storage for some crops because the ``harvest is expected to exceed available commercial storage space in certain areas.''
U.S. storage capacity on farms and in commercial elevators for all grains and oilseeds totaled 19.885 billion bushels as of Dec. 1, up 0.8 percent from a year earlier, the USDA said in January.
About 20 percent of the corn crop was harvested as of Oct. 1, compared with 13 percent a week earlier and 25 percent a year earlier, the USDA said last week. The five-year average is 23 percent. Soybean crops are 19 percent harvested, up from 9 percent a week earlier. The figure is down from 33 percent a year ago and a five-year average of 26 percent.
``Even though U.S. farmers will go to extraordinary lengths to store as much of this year's corn crop as possible, some will have to be sold,'' Karlin said.
Hedge Funds Exit
Prices may fall because increased speculative investments by commodity and hedge funds last week overextended price gains, said Jeff Beal, a consultant for Strategic Marketing Services Inc. in Rockford, Illinois.
Grain futures trading on the Chicago Board of Trade reached a record on Oct. 5, the same day that wheat prices rose to a 10- year high and corn reached levels not seen in 11 weeks.
Agricultural futures totaled 929,546 contracts on Oct. 5, up from the previous record of 869,005 set on Feb. 22, 2005, the exchange said. The CBOT's agricultural contracts include futures and options on corn, soybeans, wheat, rice, soybean meal, soybean oil and oats.
Commodities may be at the start of a ``protracted bear market'' because record speculation by investors has pushed prices too high, Merrill Lynch & Co. said in a report last week. Prices are 60 percent higher than they should be, given supply and demand levels, Richard Bernstein, Merrill's chief investment strategist in New York, said in the report.
``The record volume is a sign of an emotional peak,'' Beal said. ``Unless there is a bullish production surprise from the USDA,'' the markets are overpriced relative to supply and demand fundamentals, he said.