Corn Falls on Record Crop, Prospect for Slowing Demand in China

Corn fell to a 12-week low on concern that record U.S. production will overwhelm global demand as China seeks to slow economic growth. Limits on lending in China sparked a rally in the dollar, sending crude oil to a five-week low and the Reuters-Jefferies CRB Index of 19 commodities down as much as 1.1 percent. On Jan. 12, the U.S. forecast record world production, signaling ample supplies for makers of livestock feed, sweeteners and ethanol.

“Rising supplies are not supportive for a bullish outlook,” said Greg Grow, the director of agribusiness for Archer Financial Services in Chicago. “The dollar is rising on the Chinese moves to slow economic growth, reinforcing a bearish psychology in commodities.”

Corn futures for March delivery fell 5.5 cents, or 1.5 percent, to $3.6225 a bushel on the Chicago Board of Trade, after slipping to $3.6025, the lowest level for the most-active contract since Nov. 2.

The price has declined 13 percent this month after the U.S. Department of Agriculture said farmers in the U.S., the world’s largest grower and exporter, harvested a record crop in 2009.

Hedge-fund managers and other large speculators slashed net-long positions by 51 percent to 91,353 corn futures and options on the CBOT in the week ended Jan. 19, data from the Commodity Futures Trading Commission show. A week earlier, the holdings were the highest since June 2008.

Index funds that invest in baskets of commodities raised their net-long futures and options positions in corn traded in Chicago last week by 11 percent to 459,477 contracts, the fifth straight increase and the highest ever, CFTC data show.

“Liquidation of speculation positions could increase,” Grow said.

Corn is the biggest U.S. crop, valued at $47.4 billion in 2008, government figures show.

Bloomberg