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Corn falls on weak exports, USDA positioning

09/27/2012 @ 3:19pm

U.S. corn futures fell 1.2% on Thursday to a fresh three-month low, as a weak export-sales report underscored soft demand for the U.S. crop.

The decline in corn prices, which are down 10.8% for the month, also came as traders braced for an important government report Friday on domestic grain supplies.

Corn prices have fallen 13.8% since Aug. 21, when they closed at a record high as the nation's worst drought in decades withered the corn crop.

Prices are now falling as signs mount that the high prices have significantly reduced demand for the grain from the animal-feed sector, ethanol makers and foreign buyers.

In the latest evidence of lackluster export demand, the U.S. Department of Agriculture on Thursday reported that net export sales of corn in the week through Sept. 20 totaled only 400 metric tons, well below analyst forecasts for 125,000 to 300,000 tons. Weekly export-sales reports for the U.S., the world's largest corn producer and exporter, have been low for weeks.

Brazil, the world's third-largest corn producer, is undercutting the U.S. on corn prices, said David Durra, president of commodity advisory firm AgSpread Analytics. "Brazil needs to run out of corn for the U.S. to see solid export numbers," he said.

Corn futures for December delivery fell 8 1/2 cents to $7.16 1/4 a bushel at the Chicago Board of Trade.

Corn prices also have fallen this week because managed funds have been exiting bets that prices will rise, looking to reduce their risk ahead of Friday's supplies report from the USDA, traders said. The agency will report the size of U.S. corn, soybean and wheat supplies in storage on farms and elsewhere as of Sept. 1.

For corn, traders will compare the number released by the USDA to a forecast it made earlier this month for domestic inventories. Analysts on average expect the USDA to report corn stockpiles of 1.126 billion bushels, down 4.7% from the its most recent forecast, according to a Dow Jones Newswires survey.

But uncertainty about what the USDA will report has fueled a sell-off this week. Some analysts say inventories could come in higher than expected, partly because farmers are harvesting their crops earlier than usual this year after a warm spring and early planting. That may affect how much corn was on hand at farms and grain elevators on Sept. 1.

"It's corn that could have a major swing," said Brian Hoops, president of brokerage Midwest Market Solutions.

Wheat futures also fell Thursday as funds exited bullish bets on prices, traders said. Wheat and corn prices often move in tandem because both are used in animal feed. Worries about lackluster export demand for U.S. wheat also weighed on futures.

CBOT December wheat fell 13 3/4 cents or 1.6% to $8.55 1/2 a bushel. Kansas City Board of Trade December wheat fell 16 1/4 cents or 1.8% to $8.78 1/4 a bushel. MGEX December wheat fell 15 1/4 cents or 1.6% to $9.14 1/4 a bushel.

Soybean futures settled slightly lower, after trading higher earlier in the session. Funds also sold soybeans to reduce risk before Friday, traders said. An influx of supplies from the U.S. soy harvest has recently weighed on prices as well.

CBOT November soybeans fell 2 1/4 cents or 0.1% to $15.70 3/4 a bushel.

Write to Owen Fletcher at owen.fletcher@dowjones.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires
(END) Dow Jones NewswiresSeptember 27, 2012 15:50 ET (19:50 GMT)
DJ U.S. GRAIN AND SOY REVIEW: Corn Falls on Weak Export Demand->copyright

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