Grain futures lose ground, corn off 5-month high as rally seen overdone

Grain futures lost ground on Tuesday, corn retreated from yesterdays five-month high as investors deemed the rally excessive after a government report showed production in the US, the world’s biggest exporter of the grain, may surge to a record high this year.

On the Chicago Board of Trade, corn futures for May delivery lost 0.61% to trade at $4.5462 a bushel by 15:32 GMT. Futures hit a session high at $4.5788 per bushel, while day’s low was touched at $4.5438 per bushel. Yesterday, prices touched $4.5862 per bushel, the strongest since September 30.

Corn has advanced 7.6% this year after it lost nearly 40% in 2013, the steepest annual drop on record and the worst annual performance since at least 1959.

The US Department of Agriculture reported on February 21st that US corn production is expected to surge 4.1% to 13.985 billion bushels. According to estimates by the same government agency, US domestic stockpiles may reach 2.111 billion bushels on August 31st next year, a 43% increase, compared to a year earlier. At the same time, old-crop export sales plunged 46% to 691 439 metric tons compared to a week ago.

“Prices are being weighed by the USDA forecast of a record large U.S. corn production,” Vanessa Tan, an analyst at Phillip Futures Pte in Singapore, said in a Bloomberg interview. “Weekly export sales also fell below market expectations. This reflected lackluster demand, pressuring prices as well.”

DTN.com reported on February 24th that heavy thunderstorms occurred in Brazil during the weekend, especially in portions of Mato Grosso and Parana producing regions. The heavy rain will probably delay fieldwork, as some local flooding may have occurred. The latter includes harvest delays for soybeans and first crop corn, along with delays to planting of second crop corn. According to the website, soil moisture for filling crops is adequate to surplus at the moment.

Elsewhere on the grains market, soybeans futures for settlement in May fell by 0.32% to trade at $13.7063 per bushel by 15:38 GMT. Prices touched a session high at $13.8012 per bushel, the strongest since September 13, while day’s low was hit at $13.6612 per bushel. The grain settled last week 2.5% higher, after adding 0.5% in the previous 5-day period. However, the oilseed has lost 8.5% in 2013.

Wheat down as well

On the Chicago Board of Trade, wheat futures for settlement in May lost 1.37% to trade at $6.0912 per bushel by 15:39 GMT. Prices touched a session high of $6.1975 per bushel, while day’s bottom was touched at $6.0512.

The grain settled last week 2.1% higher, after adding 3.4% in the previous 5-day period. However, wheat slumped 22% last year, marking the largest annual decline since 2008, on expectations for a record global output of 712.7 million tons, according to data by the US Department of Agriculture.

DTN’s February 24th forecast called for a harsh new cold wave to sweep across the US Midwest, with temperatures from at least 15 to 25 degrees Fahrenheit below normal or even lower. The soft red winter wheat is under freezing threat as the recent warm conditions have melted some of the protective snow cover.

Meanwhile, a return to colder weather is also expected in the northern and eastern part of the US during the week. The cold air seems to remain mainly outside the wheat belt of the Southern Plains, but it bears watching.