Corn futures’ year-to-date losses balloon to 30%

July 30th, 2013

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Category: Grains, Oilseeds

(MarketWatch) – Grain futures have taken a big hit with the market encouraged by “near perfect weather,” driving prices for corn down by more than 30% year to date.

“We entered key yield development time” for corn pollination, said Tim Hannagan, grain analyst at Walsh Trading. “Weather was near perfect with timely rain and no excess heat.”

“Traders felt that with longer-term forecasts into early August of much of the same weather,” we would all but be assured a record corn crop, he said.

The December corn contract CZ3 +0.79% closed at $4.73 a bushel Monday, down 0.6%, or nearly 3 cents for the Chicago Board of Trade session. Tracking the most-active contracts, prices have tallied a two-week loss of 6.6%, according to FactSet data. They have fallen roughly 7% for the month so far and lost about 32% for the year.

The July 11 World Agricultural Supply and Demand Estimates report (WASDE) was “the first official prediction of a record corn crop,” with almost 14 billion bushels expected in this year’s U.S. harvest, said Sal Gilbertie, president and chief investment officer at Teucrium Trading LLC.

“Any production level at or close to the estimated numbers will replenish the corn balance sheet to near record levels of ending stocks (inventories) after the autumn harvest,” he said. “Soybeans and wheat are also expected to have healthy levels of production this year, although their ending inventories will not approach record levels seen in the past.”

September wheat WU3 +0.69% settled at $6.515 a bushel Monday, up over a penny, or 0.2%.

November soybeans SX3 +0.31% fell 8.5 cents, or 0.7%, to $12.20 a bushel. Tracking the most-active contracts, wheat’s lost over 16% and soybeans are down over 13% year to date.

Hannagan said that weather remains 90% of the corn market’s pricing influence up to August 25. “Of course, we then watch for an early frost,” he said.

The U.S. Department of Agriculture’s weekly Crop Progress report issued Monday afternoon showed that 17% of corn crops in 18 states were in excellent condition and 46% were in good condition for the week ending July 28, unchanged from the previous report.

“The world has been accustomed to relatively high grain prices for the past few seasons, but lower prices often stimulate higher demand,” Gilbertie said. “We will have to see if the current price declines hold should demand increase for lower-priced grains.”

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