14-Jan-2012 - Rain Falls on Corn's Parade

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By LIAM PLEVEN in New York and MATT MOFFETT in Buenos AiresCorn bulls are getting drenched. Prices plunged 6.1% Thursday, as the U.S. government startled traders with a higher estimate of the domestic harvest. That came after recent downpours in Argentina eased fears of heat damage to the world's second-largest exporter. The sharp, 40-cents-per-bushel drop—the daily limit allowed by the Chicago Board of Trade—put an abrupt end to a rally that had sent corn up 12.5% in less than a month, driven largely by the threat of dry weather in South America and expectations of tighter U.S. supplies. Other basic agricultural products fell, too, with wheat futures declining 5.6% and soybeans dropping 1.6%. Corn settled at 6.115 a bushel, a 22% drop from the record hit in June, while wheat and soybeans are down 32% and 19% from their 2011 highs, respectively. Falling NFL shop jerseys prices could temper concerns about food inflation, which spiked in mid-2010 as crop values shot up. The U.N. Food and Agriculture Organization said Thursday its world food price index fell 2% in December, and now stands 11% below its Feb. 2011 peak. But corn supplies remain tight by historical standards, leaving the market vulnerable if Southern Hemisphere weather woes persist or the 2012 U.S. crop runs into any problems. Corn customers could also see the drops as a buying opportunity. "I wouldn't be surprised to see China come in and import more corn in the coming days," said Hussein Allidina, a commodities analyst at Morgan Stanley. In its monthly crop report, the U.S. Department of Agriculture boosted its estimate of total 2011 production by 48 million bushels. That is a relatively small portion of a crop now estimated at 12.4 billion bushels, but some analysts expected a decline. The USDA also said corn stockpiles as of Dec. 1 stood at 9.6 billion bushels, more than many analysts thought. Periodic government reports about the cheap NFL jerseys corn crop have varied widely and stunned markets a number of times in recent years, sparking skepticism among farmers and analysts as to their reliability. While the USDA also slashed its estimate of current Argentine production by more than 10%, to 26 million metric tons, due to the earlier dry, hot weather, some believe the damage is even greater. Gustavo Lopez, who monitors crops for the Agritrend consultancy in Buenos Aires, said he is estimating a corn crop of about 25 million metric tons, above last year's production though not as much as Argentina had hoped for at the start of the planting season. "I think the rains have been adequate to avert the worst scenario," said Mr. Lopez. Troubles could still lie ahead for South American growers. The fertile area of Chacabuco, home to Argentina's National Corn Festival, got about 30 millimeters, or an inch, of rain this week—but that is about the same amount that fell in December, said Sergio Pinteño, president of the Rural Society of Chacabuco. It's a case of too little, too late for many farmers, he said. "There has already been irreversible damage done to a lot of fields," says Mr. Pinteño. Marcelo Rey, who heads a team of agronomists for Argentina's Grupo Los Grobo, a big farming company, added, "We're seeing zones where potential yields are going to be 30% or 40% below what was anticipated." In Brazil, another key exporter, a blistering drought has racked the southern state of Rio Grande do Sul. State authorities estimate corn production in Rio Grande do Sul could decline by 40% from last year. Another southern state, Paraná, has also been hit, but not as hard. Still, other key areas in western and central Brazil have had adequate rainfall, said Alysson Paolinelli, head of the Brazilian Association of Corn Producers. In addition, the area planted will NHL jerseys probably exceed last year's area by about 10%, as producers shift away from beans and wheat, he said. "It won't be a bad year, though not as good as it might have been with more rain," said Mr. Paolinelli. —Michael Haddon contributed to this article. Write to Liam Pleven at liam.pleven@wsj.com and Matt Moffett at matthew.moffett@wsj.com

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