| CHICAGO, July 26
CHICAGO, July 26 Widespread rains last weekend
in the U.S. Corn Belt sparked a record drop in cash corn and
soybean prices - a wave of declines that triggered a steep fall
in futures at the Chicago Board of Trade this week, grains
traders and analysts said.
Cash premiums for corn and soybeans that slowly rose to the
highest levels ever in the wake of last summer's drought fell 20
percent this week, with farmers selling old-crop supplies as
damp and cool weather benefited the developing new crop.
At a central Iowa processor owned by Cargill Inc,
grain buyers on Monday were willing to pay $7.06 per bushel of
corn. By Friday, that price fell to $5.57.
And at a closely watched processor owned by Archer Daniels
Midland Corp in Decatur, Illinois, merchants sought to
buy soybeans at $16.40 per bushel on Monday, a price that fell
to $13.58 by the end of the week.
"We knew it was going to happen at some point in time. We
just didn't know exactly when. The end users decided that they
didn't want to pay up for bushels," said Greg Johnson, a grain
merchant at the Andersons Inc, adding that the moves in
price were the most extreme in his 30-year career.
"If it keeps raining, we should have plenty of corn and
beans," Johnson said.
Values for the "old" crop converge just before farmers begin
harvesting the "new" crop. That convergence was expected to be
more pronounced this year after last year's drought reduced
yields while huge spring plantings and largely favorable weather
this year were expected to produce record corn and soybean
Rainfall last weekend brought needed moisture to the
developing crops, especially in the big-producing grain states
of Iowa and Nebraska where crop conditions had declined two
weeks in a row, according to U.S. Agriculture Department data.
The showers gave some farmers more confidence that their
crops would produce large yields and they boosted sales of the
supplies they had in storage from last year.
The increased farmer sales as well as the rains gave buyers
at big trading houses that also include Bunge Ltd and
Louis Dreyfus Corp assurance that U.S. supplies will
not run out before the harvest.
USDA has estimated the current U.S. corn supply as the
smallest in 16 years and soybeans the smallest in nine years.
Lower-than-normal temperatures and occasional showers are
also forecast in the next week to 10 days, providing a mostly
stress-free outlook for the crops with many corn plants now in
their most vulnerable pollination phase.
"We're coming from record levels so that allows you have the
record drops," said Terry Linn, analyst at Chicago-based
brokerage The Linn Group. "The weekend rains were helpful. We
don't have a serious crop threat, we are going to have crops and
we are going to have good crops."
The plunge in the so-called basis bids corresponded with a
drop in futures - CBOT August soybeans fell four days in a
row for the worst sell-off in nearly four years. CBOT September
corn futures settled on Friday at the lowest level in the
life of the contract.
Many advisory services had long told their clients to sell
any supplies left in storage, to limit exposure in a move such
as the one seen this week.
It is unknown if the major agribusiness companies known
collectively as the ABCDs have enough grain bought to last until
harvest, or if cash prices will need to ratchet higher in the
coming weeks before the earliest crops are gathered, beginning
in states such as Alabama, Louisiana and Texas.
The drop in prices brought farmer selling to a halt, grain
"I am not saying we need to get back up to record premiums
but we are not buying any grain at these levels," said an export
trader for one of the ABCD companies. "We have another month to
get through at least."