April 29, 2011

US corn prices decline amid unfavourable weather forecasts

US corn prices plummeted on Thursday (Apr 28) due to predictions of drier weather in Western states, which could offer farmers an opportunity to sow fields that have been soggy because of spring rains.

End-of-the-month selling also appears to have driven down grain prices as investment funds sell off their holdings and take advantage of historically high prices.

Corn for July delivery fell US$0.30, the maximum amount allowed by futures exchanges, to settle at US$7.2925 a bushel Thursday (Apr 28). Soy fell US$0.31 to US$13.535 a bushel.

An analyst said his fund sold off grain contracts to lock in gains made over the last month. He suspected other funds did the same thing, depressing prices. Once corn prices fell as much as trading exchanges allowed, traders sold off bean contracts as well.

"We just simply wanted to take the profit off the table. You cannot guarantee a good profit unless you take it," the analyst said.

At the same time, forecasts of drier weather in Western US states means farmers might finally start to get their crops into the ground. An unusually wet spring has delayed planting across much of the country. If the dry weather materialises, farmers could get out in their tractors and ease fears of a supply crunch later this year.

"We know these farmers have big machines, and we know they can put in a lot of corn in a little time," the analyst said.