Big corn supplies to drop prices
Heavy rains in the U.S. Corn Belt are tapering off just in time for many farmers to sow their crops, a shift that is putting a damper on corn prices.
Cold, wet weather from Nebraska to Ohio had delayed corn plantings this spring and threatened a bumper crop this fall.
Now, though, farmers are able to play catch-up. Many investors and analysts think the U.S.--the world's biggest corn grower and exporter--will produce one of its biggest harvests ever, replenishing supplies after last year's severe drought and sending prices in the $46 billion corn-futures market lower.
Commodity traders expect the U.S. Department of Agriculture to bolster this view Friday, when the agency releases its monthly crop report. The average forecast from 20 analysts calls for domestic corn supplies to climb to nearly two billion bushels next summer, according to a Dow Jones Newswires survey, from about the 757 million estimated to still be in stockpiles before the upcoming harvest.
"It's going to take another real weather problem to avoid swimming in excess supplies this fall," said Steve DeCook, who manages $55 million for Four Seasons Commodity Corp., a trading-advisory firm in Dallas. Mr. DeCook is betting on a decline in corn futures.
Prices have fallen 17% since hitting a record high last August amid the worst U.S. drought in decades. Driving prices lower are weak demand for U.S. corn from foreign buyers and record corn harvests this year in Brazil and Argentina.
Futures briefly perked up last week as the wet weather kept farmers from getting planters into their fields. As of Sunday, only 12% of the nation's corn crop had been planted, the lowest level for that point in the year since 1984.
But forecasts called for drier weather this week, indicating that farmers in many states will have a window later this week and next in which to plant their crops.
Many farmers will rush to plant corn in that window, and analysts expect 30% to 40% of the nation's corn crop could be planted by Sunday. That suggests a very rapid pace of planting even though it is still far below the five-year average completion rate of about 66% for this time of year, according to brokerage Futures International LLC.
Corn for May delivery, the front-month contract, was recently up 16 1/2 cents, or 2.4%, to $6.91 1/2 a bushel Thursday at the Chicago Board of Trade.
In February, the USDA estimated that this year's corn harvest will be a record 14.5 billion bushels, up 35% from last year. The agency will update that number on Friday in its report.
Analysts will pore over the report for signs that planting delays will affect the nation's corn yield, or how many bushels are harvested per acre. Projected yields start to decline when planting gets delayed beyond mid-May, and a crop planted in early June can produce 25% less corn than normal in the Midwest, according to farmers and agronomists.