September 9, 2010

US corn takes hit from concerns over global economy

US corn futures slumped from the highest levels after more than 14 months as grains and other commodities tracked losses in equities amid concern that global economic growth may be restrained.

Corn for December delivery fell for the first time in five days, losing as much as 0.4% to US$4.642 a bushel on the CBOT. The contract Tuesday (Sept 7) climbed to US$4.69, the highest price for the most-active contract since June 11, 2009. It traded at US$4.652 a bushel at 2:44 pm Singapore time.

The MSCI World Index, which tracks global stock values, fell for a second day, after losing 1.1% on Tuesday (Sept 7) amid concern that European lenders will need more capital to offset holdings of bonds in the euro zone's weakest economies.

"There's a little bit of uncertainty about the trends generally in the financial markets. Grains including corn and wheat may resume their rally because of lingering concerns about supply," said Michael Pitts, commodity sales director at National Australia Bank Ltd, Wednesday (Sept 8).

The US corn crop's condition deteriorated last week. Corn rated good or excellent dropped to 69% of the total as of September 5, from 70% a week earlier, USDA reported Tuesday (Sept 7).

The US crop may be 13.147 billion bushels, 1.6% smaller than the 13.365 billion bushels forecast by the USDA last month, as hot, dry weather reduces yields, Allendale Inc said September 3, citing results of a survey of farmers in producing states from August 9 to August 27. The USDA will release its latest estimate on the US crop, and global supply and demand September 10.

The corn harvest may be "substantially lower than what the USDA had forecast and that will start to tighten the balance sheet in the US. Certainly, there's enough uncertainty around the grains complex generally" to generate a further rally," Pitts said.

December-delivery wheat contract was little changed at US$7.3425 a bushel in Chicago.

Russia's government raised its estimate for national grain stockpiles to 26 million tonnes, from about 22 million tonnes earlier, sufficient to meet domestic demand for food and animal feed, Agriculture Minister Yelena Skrynnik said Tuesday (Sept 7).

The worst drought in at least half a century has destroyed 30% of crop plantings in the 38 regions across Russia in which the government declared emergencies. "Weather-related losses amount to more than 39 billion rubles (US$1.3 billion)," Skrynnik said.