Commodities: Corn Set for Biggest Drop Since 1960

Dec. 31 (Bloomberg) — Corn headed for the biggest annual drop since at least 1960 and wheat tumbled the most in five years as grain production climbs to records worldwide and outpaces demand for food, livestock feed and use in biofuels.

Corn plunged 39 percent in 2013, the worst performance among 24 commodities on the Standard & Poor’s GSCI gauge, as the U.S. harvest rose to a record, recovering from the prior season when crops were hurt by the worst drought since the 1930s. Farmers worldwide are producing record amounts of everything from soybeans to wheat, leaving food prices tracked by the United Nations 13 percent below an all-time high in 2011 and spurring banks including Goldman Sachs Group Inc. to predict further declines in crop prices in 2014.

“We’ve moved from a deficit environment to a surplus environment with big crops in the U.S.,” Chris Gadd, an analyst at Macquarie Group Ltd. in London, said by telephone today. “Rather than trying to ration demand, the function of price now is to try and find demand.”

Corn for March delivery, the most-active contract, fell 0.1 percent today to $4.23 a bushel as of 5:25 a.m. on the Chicago Board of Trade. Prices earlier touched $4.2225, the lowest since Dec. 17. The grain declined 0.9 percent yesterday as rain improved prospects for developing crops in South America, where conditions in some areas had been hot and dry. Futures are 50 percent below the record $8.49 a bushel achieved in August 2012 during the height of U.S. drought concerns last year.

Corn Harvest

The U.S. corn harvest, the world’s biggest, will total 355.3 million metric tons, rebounding 30 percent from the prior season, the U.S. Department of Agriculture estimates. That will push global output to a record 964.3 million tons, overtaking consumption of 932.4 million tons and spurring an increase in world inventories, the USDA says.

Soybeans fell 0.2 percent today to $13.06 a bushel, heading for a 7.4 percent drop this year. Wheat, little changed today at $6.0025 a bushel, headed for a 23 percent decline in 2013, the biggest drop since 2008. Milling wheat traded in Paris was poised to fall 18 percent this year to 204.75 euros ($282.04) a ton on NYSE Liffe.

Annual declines in corn, soybeans and wheat were all larger than the 1.8 percent loss on the S&P’s GSCI commodity gauge. The MSCI All-Country World index of equities climbed 20 percent, while the Bloomberg Dollar Index, a gauge against 10 major trading partners, increased 3.5 percent. The Bloomberg U.S. Treasury Bond Index fell 3.2 percent.

Global grain production will reach 1.94 billion tons in 2013-2014, the most ever, the London-based International Grains Council estimates. Rising supplies of grain mean the world’s food-import bill may drop to $1.15 trillion in 2013, or 3.2 percent less than a year earlier, the UN estimates. Goldman Sachs said Dec. 5 that corn would drop to $3.75 a bushel and soybeans to $9.50 a bushel in 12 months.

World soybean production will rise to an all-time high of 284.9 million tons in the 2013-14 season as top-producer Brazil is expected to harvest the biggest crop ever, the USDA estimates. Wheat output will reach a record 711.4 million tons, up 8.4 percent from the prior year, according to the USDA.

– Whitney McFerron and Phoebe Sedgman, Copyright 2013 Bloomberg.

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