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Weak export demand sinks grains

10/25/2012 @ 3:23pm

U.S. corn futures fell 1.7% Thursday on renewed worries about weak export demand.

Corn futures for December delivery fell 12 1/2 cents to $7.42 a bushel at the Chicago Board of Trade.

The drop came after the U.S. Department of Agriculture said net export sales of corn in the week through Oct. 18 were 142,300 metric tons, below the level analysts had expected.

"Our corn exports...were not very good, just like they haven't been very good for several weeks now," said West Des Moines, Iowa-based Steve DeCook, president of Four Seasons Commodities Corp., a commodity trading advisory firm managing about $40 million in funds. "There's just no reason to buy" corn futures, he said.

The severe U.S. drought this year widely damaged what was once expected to be a record corn crop. Now, the USDA forecasts the national average yield will be the lowest since 1995.

As expectations declined for the crop, corn futures soared to a nominal all-time closing high of $8.31 1/4 a bushel on Aug. 21.

Futures have since declined on worries about high prices curbing demand for the grain. Export sales and ethanol production have fallen off, and traders are also concerned about weaker demand from livestock farmers, who use corn in animal feed. Futures on Thursday settled down 10.7% from their August peak.

China's purchases of U.S. corn were strong early this year but slowed over the summer as prices rose. And U.S. corn exports to South Korea, Japan and Taiwan so far this calendar year are down from a year earlier.

Still, analysts warn that with tight supplies, corn prices need to stay high to keep demand down.

"If you get up to $8 then you lose the demand, but we can't really afford to break it to $7 or lower because then there's too much demand for the size crop we had," Mr. DeCook said.

Soybean futures also fell Thursday on a poor weekly export sales report. Soybean futures also face pressure from expectations that Brazil and Argentina, the biggest producers after the U.S., will harvest record crops next spring.

November soybean futures fell 6 1/2 cents, or 0.4%, to $15.64 a bushel.

Wheat futures fell on technical selling and pressure from lower corn prices. Corn and wheat often move in tandem since both grains can be fed to animals.

CBOT December wheat fell 11 1/4 cents, or 1.3%, to $8.72 3/4 a bushel. KCBT December wheat fell 7 cents, or 0.8%, to $9.14 1/4 a bushel. MGEX December wheat fell 9 3/4 cents, or 1.0%, to $9.45 1/4 a bushel.

Write to Owen Fletcher at owen.fletcher@dowjones.com
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(END) Dow Jones Newswires
October 25, 2012 15:33 ET (19:33 GMT)
DJ U.S. GRAIN AND SOY REVIEW: Corn Falls on Poor Export Demand->copyright

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