2014.07.0702:52:25UTC+00Record harvest driving bear market for corn

Investors and fund managers have been in a flurry to reposition themselves as corn supplies are expected to be at their highest in the coming months.

With supplies already at their highest in four years, an incoming harvest from the planting regions of the United States urged on by June’s wet weather is seen to push it even further by as much as 2.8%. This means that, should planting conditions continue to be favorable, it could amount to the largest US historical output of 14.314 billion bushels, says research provider Linn Group Inc.

The likely increase in supply made prices on futures contracts for the grain enter a bear market at the end of last week when it fell to a low of $4.145 per bushel before ending up at $4.1525 to show a negative difference of 20% on the Chicago Board of Trade. Together with other commodities, it pushed the 22 raw materials tracking Bloomberg Community Index to drop by 2.6%.

It is forecast that corn prices will fall even more by year end when a bushel will fetch for $4, according to financial services firm Goldman Sachs. A similar sentiment was echoed by Rabobank International who said average prices during the fourth quarter will be at $4.07.

As a result, long positions on corn futures and options were reduced by 58% to 115,176 contracts as money managers shed off bullish outlooks that lingered from two years ago when corn prices surged behind the damage of a drought in the US.  

Stockpiles in the country grew 39% at the beginning of June compared to the previous year to reach 3.854 billion. It is predicted to be at 1.726 billion on September 2015 right before next year’s harvest.