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Corn price seen falling, spread widening

08/20/2013 @ 7:50am

Global corn prices are expected to decline significantly over the next three months, despite concerns about dry weather in parts of the U.S., and corn's discount to soybeans may widen, a top U.S.-based farm economist said Tuesday.

Cheaper exports in global markets by Ukraine and Brazil, a slowdown in U.S. domestic demand for corn to make ethanol for blending with gasoline and a major recovery from a drought in the U.S. will all contribute in dragging down prices, Jay O'Neil, senior agricultural economist at Kansas State University, told Dow Jones Newswires here ahead of an international grain conference.

"There are pockets of below-normal rain [in the U.S], but by and large, the crop looks beautiful, and we're expecting higher yields [than last year]," Mr. O'Neil said.

East Kansas, Missouri, Southern Illinois, Ohio and Nebraska are among major corn-producing regions that have benefited from the rain in recent weeks, he said.

As the crop is harvested in September and October, prices are expected to fall to around US$4.30 a bushel, a level not seen in the last three years, he said. The most active corn futures for December delivery on the Chicago Board of Trade are currently around US$4.80/bushel.

Dry weather is hurting the corn crop in western Iowa, southern Minnesota and western Kansas, but even if overall U.S. corn production is below initial expectations, it will still be sharply higher than actual output last year, when a serious drought hit almost the entire corn belt in the U.S. Midwest, Mr. O'Neil said.

Last week, the U.S. Department of Agriculture lowered its forecast for the country's corn output for the next marketing year that starts Sept. 1 by 5 million metric tons to 350 million tons.

"Despite the cut, production is still projected 28% higher than last year, and local industrial demand to make ethanol is sluggish," said Mr. O'Neil.

He said a mild summer with temperatures 10 degrees centigrade below normal in some areas has increased the possibility of an early September frost, but it will hurt soybean supply more than corn. The U.S. soybean crop has already been hit by late plantings due to wet weather, yields are expected below an earlier average projection of 45 bushels an acre and inventories are at a multi-year low.

An early frost could push up soybean prices by US$1/bushel and widen the differential with corn, he said. The most active CBOT November soybean futures are currently around US$12.93/bushel.

Write to Sameer C. Mohindru at sameer.mohindru@dowjones.com

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(END) Dow Jones Newswires

August 20, 2013 06:56 ET (10:56 GMT)

DJ Corn Prices May Fall, Widen Differential with Soybeans -Economist->copyright

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mark guildenzoph 08/20/2013 @ 9:08am Expecting higher yields then last year I would hope so, the worst drought in 25 years and you say the prices are going to go down because it will be better than that go back to school.

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