Corn Falls to 1-Month Low on U.S. Stockpiles Forecast, Weather

By Jae Hur

July 14 (Bloomberg) -- Corn tumbled to a one-month low after a government report showed an increase in U.S. inventories before the 2009 harvest and on speculation ideal crop weather will help the U.S. crop recover from the worst Midwest flooding in 15 years.

About 833 million bushels of unsold corn will be on hand before next year's harvest, up from 673 million forecast a month ago, the U.S. Department of Agriculture said July 11. The surplus for the year ending Aug. 31 will be 1.598 billion bushels, up 12 percent from last month's estimate as ethanol-plant construction delays and falling demand for animal feed lifts this year's corn supply, the government said.

``The USDA report last Friday was the main catalyst for the movement in today's trade,'' said John Reeve, associate director for agricultural commodities at UBS AG in Singapore. ``The numbers were certainly very bearish for corn.''

Corn for December delivery lost as much as 24.75 cents, or 3.5 percent, to $6.845 a bushel, the lowest since June 11, in after-hours trading on the Chicago Board of Trade and stood at $6.86 as of 12:17 p.m. Singapore time.

The price declined 8.7 percent last week, the biggest such drop since March. Most-active futures still have almost doubled in the past year, reaching a record $7.9925 on June 27.

Global inventories will total 105.3 million tons, up 2 percent from 103.3 million tons predicted a month ago, and down from the 124.6 million expected this year, the USDA said July 11.

The corn market was also under pressure from forecasts for favorable crop weather this week that could help develop plants in the U.S. Midwest, said Takaki Shigemoto, an analyst at Tokyo- based broker Okachi & Co.

Soybeans Drop

In other markets, soybeans declined for the first day in four on concern the recent gains close to a record were overdone. Wheat fell on speculation that a drop in corn prices will reduce demand for the grain as a cheaper alternative to feed livestock.

Soybeans for November delivery fell as much as 41 cents, or 2.6 percent, to $15.55 a bushel and traded at $15.60 as of 12:17 p.m. Singapore time. The contract rose as high as $16.20 on July 11, the highest since its July 3 record of $16.3675. Most-active futures have risen 79 percent in the past year.

The USDA projection of drops in U.S. output and reserves has already been factored into the market, UBS's Reeves said.

This year's U.S. crop will total 3 billion bushels, down 3.4 percent from 3.105 billion forecast in June, the USDA said. Yields are projected to fall to 41.6 bushels an acre from 42.1 bushels estimated in June. Inventories before next year's harvest will total 140 million bushels, down 20 percent forecast in June.

Wheat Falls

Wheat for September delivery declined as much as 1.5 percent to $8.18 a bushel and traded at $8.2075 as of 11:53 a.m. Singapore time. Prices have slumped 39 percent from a record $13.495 set on Feb. 27 as higher prices spurred farmers to boost planting.

The USDA predicted the U.S. winter-wheat crop will total 1.864 billion bushels after ample rain and warm temperatures in May and June helped plants in the southern Great Plains from Texas to Kansas. The harvest, which the USDA said was 52 percent complete as of July 6, has been helped by dry weather.

U.S. inventories of all varieties, before next year's harvest, are forecast to rise 75 percent to 537 million bushels, compared with 306 million this year. Last month, the government forecast reserves would rise to 487 million bushels.

To contact the reporter on this story: Jae Hur in Singapore at jhur1@bloomberg.net