Corn falls 3pc, biggest drop in nearly two-weeks

CHICAGO: US corn futures fell 3 percent on Tuesday for the biggest one-day drop in nearly two weeks as investors took profits and cut risk premiums as seeding of the crop was on the home stretch.

With nearly 80 percent of the corn crop seeded as of last Sunday, about 21 percent of the intended acres remains to be planted without any significant yield loss at this stage.

"Corn was hit by liquidation. They had rallied it quite a lot and I think with nearly 80 percent planted now and prospects for an increase next week, a lot of people just got out or transferred risk," said Dustin Johnson, an analyst for Iowa Grain.

Wheat also fell 3 percent notching its the biggest one-day loss in nearly two weeks and soybeans were dragged down as well in volatile dealings.

"I don't know any other reason than fund selling, I didn't hear of anything else that might have done this," said Mario Balletto, an analyst for Citigroup.

Corn and wheat had soared over 10 percent last week, in a rebound from the broad-based sell-off of commodities that had hit prices through the first half of May.

"Funds were liquidating July corn and also liquidating some of the July/December spread," a trader said.

Corn futures were lower but found a firm foundation from the excessive wet weather in the United States that was delaying plantings, threatening crop production.

Corn for July delivery closed down 20-3/4 cents per bushel at $7.33-1/4, July delivery wheat was down 23-1/4 at $7.79-3/4 and soy for July was down 1-1/2 at $13.72-1/4.

Analysts said, even though farmers made progress sowing the corn and soybean crops last week, time was running out to finish plantings and avoid serious yield losses and substantial abandonment of acreage.

USDA late on Monday said 79 percent of the corn crop had been planted, leaving close to 20 million acres (8 million hectares) of the intended 92.2 million acres unplanted. Only 41 percent of the soybean crop had been sown, leaving about 45 million left to plant.

"You would normally switch from corn to soybeans, but if it stays wet they may not finish planting either crop, they would just take the insurance money," said Dan Cekander, an analyst for Newedge USA.

Gains in crude oil and a weak dollar lent underpinning to each market but volume was thin, leaving grains and soy vulnerable to sharp price swings.

Goldman Sachs said in a commodities research note that weather remained the key for volatile agricultural markets and it expected adverse weather to push US corn prices to new highs.

"We still expect near-term upside to corn prices on stronger demand than currently reflected by the USDA. Sustained planting delays would likely increase the upside to corn prices over the next 12 months while reducing our forecast soybean upside," it said.

"For wheat, continued poor weather is creating risks of an even larger global deficit than we currently expect and presents upside risk to our neutral price outlook," Goldman Sachs said.

Goldman raised its 12-month price forecast for Brent crude oil to $130 a barrel from $107 and increased the end-2012 forecast to $140 a barrel from $120, citing global economic growth and tight OPEC spare capacity.

Copyright Reuters, 2011