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Corn futures fall on USDA report

05/10/2012 @ 4:27pm

U.S. corn futures closed lower Thursday after the U.S. government unexpectedly raised its forecast for near-term corn supplies and projected a record corn harvest this autumn.

Chicago Board of Trade corn futures for July delivery, the most actively traded contract, fell 19 3/4 cents, or 3.3%, to $5.87 1/2 a bushel, the lowest price for that contract since March 2011. Thinly traded May futures, which expire Monday, ended down 15 3/4 cents, or 2.5%, at $6.25 1/2 a bushel.

In its monthly supply-and-demand report for major crops, the U.S. Department of Agriculture said domestic corn inventories as of Aug. 31, the end of the current marketing year, are likely to be 851 million bushels, up 6.2% from the agency's previous forecast of 801 million bushels. None of the 19 analysts in a Dow Jones Newswires poll had expected the USDA to raise its forecast.

The rise was due to the USDA cutting its forecast for corn demand in the "feed and residual" category. Analysts say large wheat supplies are likely to lead livestock producers to use more wheat instead of corn in animal feed this year.

U.S. corn production is expected to rise this year to a record of 14.79 billion bushels, from 12.358 billion bushels last year, as a fast start to the planting season could boost yields to a record 166 bushels an acre, the USDA said. Last year's yield was 147.2 bushels an acre.

A harvest of that size would shatter the old record of 13.092 billion bushels set in 2009.

"These forecasts are just enormous weights on the market right now," said Joe Vaclavik, an analyst with commodities brokerage Straits Financial LLC in Chicago. "The trade was disappointed in general."

Separately, soybean futures rose after the USDA said domestic soybean stocks as of Aug. 31 are likely to drop to 210 million bushels, down 16% from the 250 million bushels it predicted a month ago and down 2.3% from a year earlier, due to higher exports and domestic use at processors.

The USDA's ending-stocks forecast for the end of the next marketing year is even lower -- 145 million bushels, below the average analyst estimate of 170 million bushels. The forecasts are likely to add to concerns about tightening soybean supplies amid lower South American production and rising Chinese demand.

CBOT July soybeans rose 25 cents, or 1.7%, to $14.55 1/4 a bushel. May soybeans rose 24 1/2 cents, or 1.7%, to $14.52 1/4 a bushel.

Wheat futures ended mixed, as the drop in corn prices pressured wheat, but the USDA cut its forecasts for domestic and world wheat inventories.

CBOT July wheat rose 1 1/4 cents to $6.01 1/4 a bushel. Kansas City Board of Trade July wheat fell 1 1/2 cents to $6.17 1/2 a bushel, and MGEX July wheat fell 3 cents to $7.27 1/4 a bushel.

-By Owen Fletcher, Dow Jones Newswires; 312-750-4120; owen.fletcher@dowjones.com

(END) Dow Jones Newswires

May 10, 2012 15:50 ET (19:50 GMT)

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