July 1, 2011

 

CBOT wheat prices plunge on US farmers overcoming wet conditions

 

 

CBOT grain prices plunged more than 10%, with wheat falling below US$6 a bushel for the first time since July, after data showed that US farmers had overcome a historically wet spring to plant the second biggest corn acreage since World War II.

 

US growers planted 92.3 million acres with corn, 1.5 million acres more than the market had expected. Estimates for US corn inventories as of the start of the month were also pegged higher than had been thought.

 

Both sets of statistics eased concerns over supplies of a grain which have been forecast to remain historically tight until at least autumn 2012. Expectations which drove corn futures to a record high earlier this month.

 

"The report was a bearish surprise on corn acres and corn stocks," broker US Commodities said. "The bull fight is out of the market without a weather threat."

 

In a further blow to sentiment, the International Grains Council lifted by 17 million tonnes, to 858 million tonnes, its forecast for world corn production in 2011-12, citing "larger US sowings and improved Black Sea production prospects".

 

In Chicago, the July corn futures contract, freed of daily trading limits by the expiry process, tumbed 10% to a three-month low. The weakness spilled over into fellow grain wheat, which fell more than 8% to an 11-month low of US$5.80 a bushel.

 

In Europe, wheat fell 7% in Paris to EUR186 (US$270) a tonne for November delivery, the contract's lowest for eight months, London's November wheat contract plunged 7% to a three-month low of EUR56.50 (US$82) a tonne.

 

"The report leaves wheat with a stronger bearish tone despite the technically oversold nature of the current market - and we have yet to see harvest take full root across Europe," Jaime Nolan at FCStone's Dublin office said.

 

USDA statisticians, following a farmer survey, pegged corn area at 92.3 million acres - 1.6 million acres more than they estimated the figure earlier this month, after a wet spring left the pace of plantings well behind normal rates, and was feared to have forced mass abandonment of land.

 

"Notable increases in acreage from last year are reported in Nebraska, South Dakota, and Minnesota," the USDA said.

 

Many of the extra acres appear to have come at the expense of soybeans, for which sowings were seen at 75.2 million acres, well below the previous USDA estimate and market forecasts, despite North Dakota farmers achieving record plantings.

 

Nonetheless, with stocks of the oilseed as of June 1 coming in ahead of forecasts, this cut in sowings was seen unlikely to support prices on Thursday (Jun 30).