Futures prices dropped sharply after a USDA report showed stockpiles were much higher than expected.
Corn prices tumbled Thursday on a rosier-than-expected supply outlook, not the best news for farmers but welcome information for food companies and ultimately consumers.
Corn futures in Chicago markets fell the most since November, while wheat experienced its biggest plunge since January 2009, as the U.S. government reported grain acreage and inventories that topped estimates by analysts.
"It was very much of a surprise," said Arlan Suderman, a market analyst with Farm Futures magazine. "Corn was the biggest shocker in acreage and in stocks."
U.S. farmers planted 92.3 million acres of corn this year, 1.8 percent more than projected by analysts in a Bloomberg News survey, and the second-most since 1944, the U.S. Department of Agriculture said Thursday. Corn stockpiles as of June 1 were 3.67 billion bushels, 12 percent higher than forecast.
In reaction, corn futures for December delivery slid by the daily limit of 30 cents, or 4.6 percent, to settle at $6.205 a bushel on the Chicago Board of Trade, the biggest drop since Nov. 16. The grain has jumped 66 percent in the past year, partly on surging demand from ethanol makers and livestock farms.
"For the end user, today was a windfall," said Don Roose, president of U.S. Commodities, an Iowa-based grain and livestock investment mangement firm. As commodity prices have risen over the past year, foodmakers like Minnesota's General Mills Inc. and Hormel Foods Corp. have been increasingly passing down their higher costs to retailers and consumers.
For packaged-food makers, the drop in corn and wheat prices offers a short-term window to lock in relatively lower input costs. However, analysts say the underlying long-term equation of high corn demand and relatively low supply hasn't changed. So the corn price retreat could be short-lived.
Why the jump in the short-term supply forecast? Farmers reacted to the market, Roose said, deciding to plant more corn because prices for that grain were comfortably high.
In Minnesota, soggy weather hasn't been kind to corn farmers: They're well behind schedule this year, a possible detriment to yields. The average height of corn plantings in Minnesota as of last week was only 16 inches, compared with a five-year average of 29 inches at this time of year, according to the USDA.
But the corn crop in major Corn Belt states such as Iowa, Illinois and Nebraska -- which haven't had the same weather issues as Minnesota -- looks good so far, Roose said.
Prices for wheat traded in Chicago often follow corn prices, and that's what happened Thursday. But longer-term factors are also putting downward pressure on wheat prices. Prospective global wheat supplies are improved over last year, when Russia rattled markets by banning wheat exports because of a major drought.
So far this year, wheat crops in Russia and throughout Europe are strong, Roose said. The same goes for many regions of the United States, he said, except the Upper Midwest. Farmers in Minnesota, the Dakotas and Montana -- the nation's largest producers of hard red spring wheat, a key grain for bread -- have had a tough time due to wet weather.
The USDA said Thursday that it plans to specifically survey farmers next month in Montana, Minnesota and North and South Dakota on acreage planted for corn, soybeans, durum wheat and spring wheat.
"A large percentage of acres remained to be planted" in those states following the survey in the first half of June, the USDA said.
Bloomberg News contributed to this report. Mike Hughlett • 612-673-7003