Corn Declines as Slide in Crude Oil Reduces Appeal of Biofuels

By Luzi Ann Javier

Sept. 23 (Bloomberg) -- Corn dropped as a decline in crude oil reduced the appeal of the grain, which can be processed into ethanol to stretch gasoline supplies, and on expectations that the U.S. will produce a bumper harvest.

Futures slid 0.8 percent after crude oil for November delivery dropped as much as 0.9 percent in New York. Crude fell after the American Petroleum Institute reported yesterday that U.S. inventories rose 276,000 barrels to 337.2 million barrels last week.

Corn futures were “influenced by crude oil prices,” Peter McGuire, managing director at CWA Global Markets Pty. Ltd. in Sydney, said today. The U.S. “corn crop is an outstanding crop. You will see further sell-off in those markets,” he said.

Corn for December delivery fell to $3.2325 a bushel in after-hours electronic trading on the Chicago Board of Trade at 2:04 p.m. Singapore time, after rallying 3.1 percent yesterday.

Corn yields in the U.S., the largest grower and exporter, are forecast to rise to a record 161.9 bushels an acre in the marketing year that began Sept. 1 as abundant soil moisture and cool temperatures during the past two months helped advance crop development, the Department of Agriculture said Sept. 11. That will push output to 12.954 billion bushels, the second-largest crop on record, the USDA said.

Still, speculation that China may begin importing corn to cool domestic prices may support U.S. futures, McGuire said.

Import costs for U.S. corn are about 9 percent lower than domestic prices in Shanghai and Guangzhou, two of the largest port cities in southern China, Na Liu, an analyst at Scotia Capital Ltd., wrote in a report dated Sept. 21.

‘Big Issue’

“That’s probably the big issue at the moment. I think they’ll have to import” corn, McGuire said, referring to China.

China’s 2009 corn output may fall 9.3 percent from a year ago, Jiang Jianhua, vice chairman of Jilin Grain, said Sept. 17. That compares with a 12 percent decline forecast by Shanghai JC on Sept. 4. The state-backed National Grain and Oils Information Center projected on Sept. 9 an output of 165.5 million tons, unchanged from 2008.

Soybeans for November delivery fell 0.4 percent to $9.1825 a bushel at 2:12 p.m. Singapore time, after rising as much as 0.4 percent earlier.

Soybean production in India, the world’s fifth-largest grower, may increase 12 percent next year, after farmers planted more acres with the oilseed, Atul Chaturvedi, president at Adani Enterprises Ltd., the nation’s biggest trader of farm goods, said in an interview yesterday.

Wheat for December delivery slipped as much as 0.6 percent to $4.5375 a bushel before trading at $4.54.

To contact the reporter on this story: Luzi Ann Javier in Singapore at ljavier@bloomberg.net