Corn Set for Worst Quarter in Five Years as Harvest Looms

Source: By Michael Hirtzer, Bloomberg • Posted: Sunday, September 29, 2019

American corn farmers hit by historic spring floods are now facing the biggest quarterly price decline in five years on upbeat U.S. government crop estimates.

Growers and analysts alike have scoffed at the U.S. Department of Agriculture’s outlook for U.S. corn, which has been consistently more upbeat than private estimates. The relatively rosy projections have corn futures in Chicago on track for a quarterly decline of about 14%, which would be the biggest since 2014.

Still, money managers trimmed their bets on a price decline for the first time in more than two months, according to data from the U.S. Commodity Futures Trading Commission, as the market gears up for harvest data and corn inventory figures.

“USDA has factored in a sizable corn crop,” Brian Hoops, senior market analyst at Midwest Market Solutions in Springfield, Missouri, said by telephone. “It’s going to come down to yields at harvest — how good or bad they are.”

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As of this week, only 7% of the corn crop was harvested, compared with the five-year average of 11%. Even with a smaller harvest, farmers are facing reduced demand. The ethanol sector that consumes more than a third of the crop has seen its margins squeezed, while Brazilian and Ukrainian corn are usurping U.S. grain in export markets.

Prior to the next USDA update on Oct. 10, the agency first will show how much supplies were remaining from last crop year as of Sept. 1. That data, due Monday, could show U.S. corn inventories up 13% from a year ago and the biggest since 1988, according to analysts surveyed by Bloomberg.

Meanwhile, warmer-than-normal temperatures should help corn plants complete the growing season before a killing freeze.

Against that backdrop, farmers should consider selling if prices rise, Hoops said. “The demand is so poor for corn — ethanol demand and export demand — that we have to be hedgers selling into any type of rally,” he said.

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