U.S. corn futures dropped 1.5 per cent, to their lowest since early April, on Tuesday as investors unwound bull spreads following a record planting pace last week that encouraged farmers to sell some old-crop supplies to ease cash market tightness, traders said.
A surge in corn planting progress during the past week eased farmer concerns about needing to hold onto supplies held in storage bins since last fall’s harvest. That relieved some pressure that supported old-crop contracts this past month.
“As the farmers get the crop planted, they are more interested in moving some old-crop inventory,” said Chad Henderson, grain market advisor with Prime Agricultural Consultants. “You probably had a pick-up in farmer sales, especially as guys got chased out of the field.”
Wheat futures also fell, hitting a fresh seven-week low on pressure from the drop in corn prices. Soybeans were mixed, with the front-month July contract edging to a three-month high while deferred months weakened.
Investors have been building up bull spreads — buying old-crop contracts and selling deferred months — in corn as supplies ran thin at processors and elevators around the U.S. Midwest. A weakening corn basis in some places provided a reason for some unwinding of those positions even as demand in the ethanol market remained firm.
“Bull spreaders have been working pretty aggressively and I think there are some that are starting to pull the trigger on coming out of a few of those,” said Jason Britt, president of Central States Commodities in Kansas City. “You get a little profit taking.”
Chicago Board of Trade July corn futures settled down 9-1/2 cents at $6.40 a bushel (all figures US$). Prices bottomed out at $6.32-1/2, the lowest level for the front-month contract since April 8.
The new-crop December contract was unchanged at $5.20-1/4 a bushel. Prices had fallen to $5.12 during overnight trading hours.
U.S. growers took advantage of mostly clear skies last week to plant corn at a blistering pace, pushing progress to 71 per cent from 28 per cent a week earlier, the U.S. Department of Agriculture said in a weekly report on Monday afternoon.
The sowing progress topped exceeded analyst estimates in a Reuters survey that went from 59 to 70 per cent.
The increase of 43 percentage points indicates that farmers in the world’s biggest corn producer seeded a single-week U.S. record of 41.8 million acres.
“It is unbelievable how quickly they can plant corn in the U.S. which is putting pressure on prices,” said Stefan Meyer, a manager for cash markets at brokerage INTL FCStone in Sydney.
Despite the big week, farmers were still behind schedule, which kept a floor under new-crop prices. The five-year average for this time of May is 79 per cent planted and some rain this week could cause delays to the final push of seeding.
CBOT July wheat ended down 4-3/4 cents at $6.80-1/2 a bushel, hitting its lowest since April 3 during the session. Soybeans were mixed, with the old-crop July contract up 13-3/4 cents at $14.78-1/4 a bushel while new-crop November dropped 4-1/4 cents to $12.20-3/4 a bushel.
Britt said there was talk that an investment fund was unwinding its contrarian bear spread position, which kept the front-month supported even as new-crop contracts weakened.
— Mark Weinraub is a Reuters correspondent covering the Chicago grain markets.