U.S. corn futures fell two per cent on Friday, their biggest single-day drop in nearly a month, on concerns about U.S. sales to China, a proposal to eliminate the U.S. ethanol mandate and the big global stockpile of the feed grain.
Wheat fell to its lowest in 1-1/2 years on technical selling and abundant world supplies, with new contract lows hit in Chicago Board of Trade soft red winter wheat, Kansas City Board of Trade hard red winter wheat and Minneapolis Grain Exchange spring wheat futures contracts.
Soybeans rallied on bargain buying after falling to a one-week low, and the spot December soymeal contract exploded higher ahead of its expiration.
At the Chicago Board of Trade, March corn ended down 8-3/4 cents at $4.25-1/2 per bushel, March wheat settled down five cents at $6.28-3/4 and January soybeans ended up 3-3/4 cents at $13.27-1/2 a bushel (all figures US$).
Analysts said there was nothing bullish for wheat, corn or soybeans in Tuesday’s USDA crop production or supply/demand reports, with plentiful supplies of each commodity to meet current demand.
“The Argentine crop got rain, so big South American production (soybeans and corn) is possible and wheat is under technical pressure. It looks like sub-$6 per bushel is possible now for wheat,” said Mike Zuzolo, an analyst for Global Commodity Analytics.
The U.S. Department of Agriculture this week estimated next year’s global ending supply of wheat at 183 million tonnes, up from 176 million this past season.
Corn ending stocks were pegged at 162 million, up from this past season’s 135 million, and the world supply of soy at the end of this marketing year was estimated at 71 million tonnes, up from the past season’s 60 million.
Corn market struggles
Traders and analysts said the focus was on the corn market because of China’s recent discovery of an unapproved, genetically modified (GMO) corn variety in cargoes of corn it received from U.S. exporters.
In addition to China’s refusal of several U.S. corn cargoes, the futures market was cooled by a group of U.S. senators’ proposal on Thursday to eliminate the country’s corn ethanol mandate.
“There is only bearish news out there for corn,” said Arnaud Saulais, of Starsupply Commodity Brokers.
Corn prices have been struggling to recover from a series of three-year lows hit during what appears to have been a record-large U.S. harvest this autumn.
Industry sources in China said that strict checks on imported corn are likely to continue until early next year as Beijing seeks to curb imports and support domestic prices in the face of what is expected to be a record Chinese harvest.
Traders are concerned about talk that the unapproved GMO corn trait might have been found in distillers dried grain (DDG) containers shipped to China from the U.S.
DDGs are a valuable, high-protein feed byproduct of the corn-based ethanol industry. China is the top global buyer of the product, accounting for about 40 per cent of U.S. exports in the 2012-13 marketing season that just ended.
“Chinese buying is the demand wild card for 2014,” Rabobank analysts said in a report.
Low world prices had been expected to spur China to boost its strategic reserves, but the GMO issue has raised doubts.
“If (Chinese) imports drop much below the seven million tonnes projected by the USDA, prices could drop into the $3.70 to $3.80 a bushel range,” Rabobank said, referring to a forecast by USDA.
Soybeans turn higher
Soybeans rallied, posting modest gains on bargain buying after the benchmark January contract fell to a one-week low on the prospects for large South American soy harvests in early 2014.
Soybeans also drew support from soymeal as the lightly traded December soymeal contract expired in dramatic fashion, rocketing up 11 per cent to a contract high of $510 per short ton in its final minutes of trading.
December soymeal ultimately settled at $462.90, well off the high, based on its spread relationship to the January contract, traders said.
Traders attributed the spike in soymeal to short-covering ahead of expiration, and persistent strength in the cash market.
Export demand for soymeal has been at a near-record high this season, with the U.S. picking up market share from Argentina, typically the world’s biggest soymeal supplier.
— Sam Nelson and Julie Ingwersen report on agricultural futures markets for Reuters from Chicago. Additional reporting for Reuters by Gus Trompiz in Paris and Colin Packham in Sydney.