Wednesday, January 13, 2010

"Corn, Soybean Record Crops Mean 20% Price Drop..." (DBA; DE; MOO; MON; MOS)

From Bloomberg:
Record corn and soybean production in the U.S., the world’s largest grower and exporter, may extend a slump in prices this month to more than 20 percent before the next harvest in September, said Roy Huckabay at the Linn Group.

Farmers will sow more of both crops this year on land used for winter wheat that was left vacant in late 2009 because of heavy rain, Huckabay said. The increase would add to corn output that the U.S. Department of Agriculture said yesterday jumped 8.8 percent last year as soybean production surged 13 percent.

The USDA’s forecast sent corn prices in Chicago down by the most since June, and soybeans reached the lowest level since November. Corn futures for December delivery may drop 28 percent to $3 a bushel by September from $4.175 yesterday, Huckabay said. Soybeans for November delivery may decline 22 percent to as low as $7.50 a bushel from $9.65 yesterday, he said.

“The fundamental story has changed dramatically and that means a long-term bear market in prices,” said Huckabay, an executive vice president for the Chicago-based commodity broker and researcher.

The USDA also reported yesterday that U.S. wheat inventories jumped 24 percent last year as world demand slumped and production increased, sending prices to their biggest drop since June. Rice futures fell to a 10-week low after the government said global inventories of the grain will be larger than forecast a month ago because of rising supplies in India.

‘No Food Shortage’

“There is no longer a food-shortage crisis,” Huckabay said. “The USDA reports indicate at least a new chapter, and probably a new book will be written” about two years of surpluses, he said....MORE

I'm not sure why but that last sub-head made me think of the famous August 13, 1979 cover story of Bloomberg's (now) sister publication, BusinessWeek:

The Death of Equities: The Death of Equities

The thesis was arguably correct for exactly three years, until August 12, 1982, then it was really, really wrong.