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Stronger South American Supply Signals Hurt Corn Prices

Sean Brown

South American Supply Speculations: How Did They Impact Grains?

Corn prices fell

Corn futures on the CBOT (Chicago Board of Trade), for March delivery, fell by 1.5% and settled at $3.62 per bushel on February 23, 2016. Corn prices fell sharply due to stronger-than-anticipated corn supply cues from South America. The Teucrium Corn Fund (CORN) traded on the heels of the CBOT and fell by 1.4% on February 23, 2016.

The prospects revived for corn production in the main producing region. According to various reports on February 23, 2016, the corn production prospects improved. Analysts think that these production projections are directly related to the global export markets and domestic prices in the near term for futures contracts.

According to UkrAgro Consultants, Ukraine’s crop production estimates improved by 1.5 million tons to 24.5 million tons for marketing year 2015–2016. The top corn producing state in Brazil is Mato Grosso. Its State Agriculture Institute, the IMEA, expects that the favorable weather conditions and forecast could support corn production by 600,000 tons in Brazil. A private research study by Dr. Cordonnier shows that Brazilian projections rose by 0.8 million tons to 84 million tons for the current marketing year. The study revealed that Argentina’s corn production estimates improved by 1.4 million tons to 25 million tons. However, it fell by 2 million tons compared to the production last year. The speculation of favorable weather conditions supported the export competition for corn and dragged prices down on the day.

Light rainy weather in the key Brazilian corn producing regions will likely continue to support the overall production prospects. It’s expected to favor the harvest conditions and support the developing corn. The favorable weather conditions could continue to support the corn production for the week ending on February 27, 2016. The speculation of favorable Brazilian weather supporting the output had a negative impact on corn prices on February 23, 2016.

Stock discussion

The fall in corn would hurt the share value of fertilizer businesses. Lower farm incomes drag fertilizer sales down. Companies such as Intrepid Potash (IPI), Terra Nitrogen (TNH), The Mosaic Company (MOS), and Monsanto (MON) fell by 7.0%, 0.62%, 3.1%, and 1.7% on February 23, 2016. The PowerShares DB Agriculture Fund (DBA) rose by 0.25% on February 23 with the decline in corn prices.

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