October 4, 2010

US corn prices plunge amid inventory data

The resolve in crop markets against shock US corn inventory data, widely criticised as erroneous, gave way in Chicago, sending prices sharply lower. Corn closed down at the daily limit allowed by exchange rules.

Grain prices, which in Asian and European trading hours had sustained limited losses, fell steeply for a second day under the weight of a USDA estimate that America's corn stocks were 1.71 billion bushels a month ago – 300-million-bushels above market forecasts.

The data have prompted widespread disbelief, and considerable anger among investors caught out by a figure deemed to have been artificially swollen by inclusion of this year's corn production.

While the stocks estimate is supposed to count only corn left over from previous seasons, the early and quick start to this year's harvest has raised questions that it has been inflated by new crop supplies.

Analysts said the market had been looking at a corn price of US$5.50 a bushel to one where Chicago's December contract closed down the full 30 cents a bushel allowed by the exchange, or 6.1%, at US$4.65 ¾ a bushel.

Wheat, whose fortunes are linked to corn by common use for purposes such as livestock feed, finished 2.8% lower at US$6.55 a bushel for December delivery, with European lots pulled lower too.

Paris's November wheat contract closed down 2.3% at the lowest for a spot lot for nigh on two months. The USDA has stood by its data, assuring the markets that it includes only old crop supplies.