U.S. grains: Corn drops as ethanol stocks build

(Dave Bedard photo)

Chicago | Reuters — U.S. corn futures fell 2.2 per cent on Wednesday, dropping below the key US$4 a bushel level on pressure from an industry report that showed demand from the ethanol sector was waning.

Wheat futures also declined on concerns about a strong dollar hitting export demand for U.S. offerings amid an ample global supply base. Soybeans ended close to unchanged after trading in negative territory for most of the day.

Traders noted investment funds actively selling corn and buying soybeans ahead of the close as part of their January rebalancing. The late moves pushed corn to session lows near the end of trading.

Corn futures have fallen in six of the last seven trading days, shedding 4.5 per cent during that time as falling crude oil and gasoline prices have cut into demand for corn-based fuel.

“We have seen the ethanol margins go into the red,” said Mark Schultz, chief analyst at Northstar Commodity Investment Co. “That signals that the (second) biggest user of corn is going to see a slowdown.”

The U.S. Energy Information Administration said on Wednesday that ethanol stockpiles surged 751,000 barrels to 18.85 million barrels in the week to Jan. 2, the largest in nearly two years. The report pushed ethanol futures to their lowest since June 2010.

Chicago Board of Trade corn for March delivery ended down 8-3/4 cents at $3.96-1/4 a bushel. CBOT March soft red winter wheat futures were 12-1/4 cents lower at $5.79-1/2 a bushel.

“We are priced out of the world market,” said Bill Gentry, broker at Risk Management Commodities.

Stiff competition for U.S. wheat from cheaper suppliers in Europe added to the bearish sentiment hanging over wheat.

Traders also noted that some Midwest growing areas received snow this week that will help protect the dormant U.S. crop from sub-zero temperatures that engulfed the region.

CBOT March soybeans were 1/2 cents higher at $10.56-1/4 a bushel.

Concerns about dry weather curtailing production in the key Argentine crop province of Cordoba underpinned soy futures.

— Mark Weinraub is a Reuters correspondent covering grain markets from Chicago. Additional reporting for Reuters by Michael Hogan in Hamburg and Naveen Thukral in Singapore.

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