September 18, 2006

 

US corn and soy prices may fall  as bumper crops expected
 

 

Corn and soy prices are slated to decline as US farmers began to harvest crops that the government said would be the second-largest ever.

 

Seventeen of 26 farm advisers, grain merchants and traders surveyed Sept. 15 recommended selling

 

Corn prices last week fell for the first time in four weeks while soy rose for the first time since early July.

 

Farmers will harvest 11.114 billion bushels of corn and 3.093 billion bushels of soybeans, boosting combined inventories to a record 16.716 billion, the US Department of Agriculture said last week.

 

Forecasts are now more optimistic now that rains have brought drought-relief after 3 dry months.

 

Corn futures for delivery in December fell 1.7 percent, to US$2.4175 a bushel last week on the Chicago Board of Trade.

 

Despite the fall last week, corn is up 17 percent from a year ago on increased exports of animal feed and as demand for corn-based ethanol surged to a record.

 

Soybeans for November delivery rose 1.75 cents, or 0.3 percent, to US$5.4975 a bushel last week in Chicago. Futures are down 3.3 percent in the past year as inventories left from last year's crop rose to a record 485 million bushels.

 

Increased supplies from the harvest may depress cash prices that rallied last week on dwindling availability of grain needed for ethanol and for livestock feed.

 

Reduced investment in commodities and commodity-index funds also may depress corn and soybean prices, said Dave Marshall, a private consultant to grain elevators.

 

He added that return in grains are unlikely to be huge unless crude oil and other energy markets recover, Marshall added. 

 

A demand surprise would be needed to turn these markets higher ahead of the harvest, he added.

 

Commodities suffered the biggest three-week decline in more than 25 years on concern slower economic growth would hurt demand for raw materials.

 

Morgan Stanley Chief Economist Stephen Roach said last week that prices may fall further as the economy cools in China, the biggest buyer of soy.