Corn Drops as U.S. May Raise Inventory Forecast on Lower Demand

By Jae Hur

Feb. 9 (Bloomberg) -- Corn declined for the first time in three days on speculation that the U.S. government may increase its estimates for grain stockpiles tomorrow. Soybeans and wheat advanced.

U.S. corn and wheat inventories may rise as the global recession reduces demand for food, animal feed and fuel, a Bloomberg News survey showed last week. The global soybean supply will be smaller than the U.S. government forecast last month after dry weather damaged crops in South America, it showed.

“Corn prices will be under pressure as the U.S. government may raise its stockpile estimates tomorrow,” Toshimitsu Kawanabe, an analyst at Central Shoji Co. in Tokyo, said today. “The downside will be limited because of strong interest from Asian buyers, including Japan and Korea, on surging shipping costs.”

Corn for March delivery fell as much as 1.3 percent to $3.725 a bushel on the Chicago Board of Trade and was at $3.7425 as of 2:21 p.m. Singapore time. The price fell 0.5 percent last week, the fifth straight drop. Futures are down 53 percent from a record $7.9925 on June 27.

The U.S. Department of Agriculture on Feb. 10 will increase its estimate of the corn surplus before the 2009 harvest to 1.858 billion bushels from 1.79 million forecast in January, according to the average estimate of 15 analysts surveyed, citing falling food and feed demand and reduced ethanol production. Reserve supplies as of Aug. 31, 2008, were 1.624 billion.

Soybeans for March delivery gained 0.4 percent to $10.05 a bushel after trading between $9.915 and $10.065. The contract rose 2.1 percent last week, after three straight weekly declines. Futures fell 39 percent from a record $16.3675 on July 3.

Brazil Crop

The USDA will project Brazil’s soybean crop at 57.4 million metric tons, down 2.7 percent from a January forecast, according to an average estimate of 13 analysts. Argentina’s estimated harvest will be cut 7.7 percent to 45.7 million tons, the analysts said. Brazil collected 61 million tons last year; Argentina, 46.2 million.

The USDA will estimate Brazil’s corn crop at 50 million tons, down from 51.5 million forecast in January, the analysts said. Argentina may produce 14.7 million tons, down 11 percent from last month’s USDA projection, they said. Last year, Brazil harvested 58.6 million tons and Argentina produced 20.9 million.

“A smaller South American soy crop is a positive for U.S. export demand,” said Toby Hassall, an analyst at Commodity Warrants Australia Ltd. in Sydney. “Soybeans look to be the pick of the grains and oilseeds complex on the long side.”

Wheat for March delivery added 0.5 percent to $5.60 a bushel by 2:32 p.m. Singapore time after losing 1.9 percent last week. Prices have tumbled 59 percent from a record on Feb. 27.

China’s worst drought in five decades is affecting more of the nation’s winter wheat and rapeseed crop, the China National Grain and Oils Information Center said today. About 153 million mu (10.2 million hectares) of crops are affected by the drought, the center said, citing a survey completed Feb. 7. It didn’t provide its previous estimate.

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