Corn Rebounds as U.S. Farmers May Withhold Supplies

By Jeff Wilson

(Corrects fourth paragraph to say corn futures rose.)

Oct. 8 (Bloomberg) -- Corn rebounded from the lowest price this year, the first gain in 10 sessions, on speculation that U.S. farmers will withhold supplies because they are guaranteed a floor price under government-subsidized crop insurance.

Farmers who bought insurance in the spring on crops they are harvesting now may lock in a price of $5.40 a bushel on some of the grain. The average cash price in the U.S. yesterday was $3.745, down 47 percent from a record in June. Depending on the levels of insurance purchased and actual crop yields this year, most insured farmers may have enough protection against further declines to wait for prices to improve.


``Everyone that has crop insurance is going to store any grain not priced for harvest delivery,'' said Terry Jones, vice president at the Russell Consulting Group in Panora, Iowa. ``Cash bids are starting to firm because of the slow farmer selling.''

Corn futures for December delivery rose 10.5 cents, or 2.5 percent, to $4.275 a bushel on the Chicago Board of Trade, after dipping to $4.07, the lowest for a most-active contract since Dec. 4. Corn, which plunged a record 36 percent in the past quarter, is down 12 percent since the start of October. The price reached a record $7.9925 on June 27.

Prices also rose on speculation that cheaper supplies of grain may revive demand from livestock, egg and dairy producers and makers of ethanol.

``The percentage drop has pushed prices down into what should be support'' from buyers of the grain, Jones said. For livestock producers, the biggest users of corn, ``we are recommending to lock in half of the first half 2009 feed needs,'' he said.

Corn is the biggest U.S. crop, valued at a record $52.1 billion in 2007, government figures show. The U.S. is the world's largest grower and exporter of the grain.

To contact the reporter on this story: Jeff Wilson in Chicago at jwilson29@bloomberg.net