Tuesday, October 5, 2010

Corn tumbles after reports of plenty

Corn wavered after a sharp reversal from recent highs as traders reassessed how much of last year’s US crop lies in storage.

The price of the grain, widely used for animal feed and motor fuel, has fallen 11 per cent from a week ago, weakened by a US Department of Agriculture report showing domestic stocks were more plentiful than analysts had expected. This eased concerns that shortfalls this year would create a supply pinch in 2011. US exports make up about 60 per cent of the world’s corn trade.
The report, issued on Thursday, “completely changed the situation”, said Rich Nelson, director of research at Allendale, a commodities brokerage. 

CBOT December corn fell to as low as $4.54¼ a bushel Monday, down 2.5 per cent, before stabilising at $4.68. 

Analysts believe the USDA’s updated agricultural supply and demand outlook due Friday will reduce forecasts for average US corn yields from the current 162.5 bushels per acre. But the grain stocks report would cushion the market from all but a surprising drop in yield, Mr Nelson said. 

Other mainstream agricultural commodities have followed corn lower. CBOT December wheat fell 0.6 per cent to $6.51¼ a bushel, while CBOT November soyabeans lost 0.1 per cent to $10.56¼ a bushel. “Corn was the leg holding this table up,” said Mr Nelson. “It’s simply been removed very quickly.” 

Cotton continued to slide after hedge funds and other short-term traders unwound bullish positions in futures and options markets. 

Last week, cotton rose to a 15-year high above $1 a pound as mills rushed to secure supplies. It then dropped steeply, triggering daily exchange fluctuation limits on Wednesday and Friday. ICE December cotton on Monday was down 1.4 per cent at 96.67 cents a pound. 

Relieving some supply uncertainty, India has allowed registration of cotton shipments, pointing to an end to a cotton export ban declared earlier this year. China’s financial markets are also closed this week, suggesting muted buying from the world’s largest cotton consumer. 

“Last week got all the bullish news out. You have to continue to feed a bull,” said Mike Stevens, an independent cotton analyst in Louisiana.

Meanwhile, crude oil hovered above $80 a barrel, with Nymex November West Texas Intermediate falling 11 cents to settle at $81.47. ICE November Brent fell 47 cents to close at $83.28 a barrel after hitting £84.41, its highest level since May. 

Among base metals, copper and aluminium consolidated above key price levels even if both posted a small drop on the day. On the London Metal Exchange, copper for delivery in three months fell 0.7 per cent to $8,040 a tonne while aluminium moved 0.3 per cent down to $2,340 a tonne. 

Tin prices, meanwhile, traded for the second day in a row within striking distance of the record of $25,500 a tonne set in early 2008. The metal hit $25,110 a tonne.

Gold prices tracked lower, failing to hit a new nominal record for the first time in six trading days. Spot gold was trading at $1,314.05 a troy ounce, down 0.2 per cent on the day. But the yellow metal is still up 13 per cent since late July.

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