Corn Drops As Slowing U.S. Economic Growth May Cut Ethanol Use

Source: By Luzi Ann Javier, Bloomberg • Posted: Thursday, June 21, 2012

Corn declined on speculation investors may cash in gains from the biggest three-day advance in more than a year as slowing growth in the U.S. cuts demand for grain used for ethanol. Soybeans and wheat fell.

December-delivery corn fell as much as 2.3 percent to $5.5375 a bushel on the Chicago Board of Trade, after jumping 12 percent in the past three days, the largest gain since April 2011. The contract traded at $5.575 at 2:28 p.m. in Singapore.

Decelerating growth in the U.S. has reduced demand for fuel. Crude fell to the lowest in eight months today after U.S. stockpiles unexpectedly climbed to the highest in 22 years. Demand for corn in ethanol production was estimated by the U.S. Department of Agriculture to account for about 34 percent of the record 14.79 billion bushel harvest predicted on June 12.

Losses in grains and oilseeds are “mainly technical in nature and very much driven by the bearish tone that’s sweeping through the crude-oil market,” Luke Mathews, a commodity strategist at Commonwealth Bank of Australia (CBA) said by phone from Sydney today. “Concerns about production prospects out of the U.S. owing to the weather remain a supportive factor.”

Ethanol inventories in the U.S. rose 2.5 percent to 21.185 million barrels in the week to June 15, from a week earlier, according to the Department of Energy.

November-delivery soybeans lost as much as 1 percent to $13.815 a bushel in Chicago, after advancing 6.6 percent in the past four days. Futures last traded at $13.8675.

Wheat for September delivery slipped as much as 1.3 percent to $6.7425 a bushel in Chicago, after gaining 9 percent in the past three days. The contract last traded at $6.78.