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| Corn prices top wheat's for first time since 1996 |
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Corn became more valuable than wheat for the first time in 15 years, amid a scramble from risk assets accelerated in commodity markets by a Goldman Sachs "sell" recommendation.
Corn at 16:25 GMT stood at $7.55 ½ a bushel for May delivery in Chicago, 0.5 cents above the exchange's May wheat contract.
The spot contracts for the two grains have not inverted since 1996 – the last time that US corn supplies, compared with stocks, stood at post-war low of 5.0%.
The inversion, which readjusted in later deals, came as investors rushed from riskier assets, spurred by concerns over factors such as Japan's nuclear crisis, which has now been upgraded to the same rating as 1986's Chernobyl disaster, to world economic prospects, after a poorly received IMF report on Monday.
US shares traded 1% lower, while London and Frankfurt stocks lost more than 1.4%.
'Very mature?'
Commodity markets had the extra headwind of a report from Goldman Sachs recommending investors take profits on a basket of raw materials the bank recommended for purchase in November.
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Crop prices as of 17:26 GMT
Chicago corn: $7.57 a bushel, -2.5%
Chicago wheat: $7.57 ¾ a bushel, -5.1%
Kansas wheat: $8.88 ¾ a bushel, -3.3%
Chicago soybeans: $13.31 a bushel, -2.7%
Paris wheat: E240.25 a tonne, -3.2% (closed)
London wheat: £208.50 a tonne, -0.5% (closed) | "In the near term risk-reward no longer favours being long the basket," the bank said.
"We believe that copper and platinum will face near-term headwinds as higher oil prices potentially translate into a negative demand shock for the metals and as these commodities are exposed to supply chain problems resulting from the earthquakes in Japan."
The report was viewed among crop investors as an excuse to sell grains, after a run which has taken corn to a series of record highs.
"Is this a signal that commodities are very mature? They [Goldman] must believe they [commodities] lost their risk-reward levels," US Commodities said.
Even soybeans tumbled, losing nearly 4%, despite Goldman singling out the oilseed as having "significant upside".
'Mercy of chartists'
At North America Risk Management, Jerry Gidel said that the Goldman report appeared to have had a big impact among funds which had been switching in and out of crops.
"We are at the mercy of chartists and trend followers. No-one is looking at the individual fundamentals."
Meanwhile, the price break, which at its worst saw corn fall nearly 4%, offered buyers a chance to stock up relatively cheaply, and heighten prospects for a shortage of the grain before the next harvest comes onstream in the autumn.
"We are not going to have enough grain at the end of the [crop] year if we give buyers as bargain every six-to-eight weeks."
Three weeks' supplies
Indeed, corn's premium to wheat, compared with a discount of more than $1.60 a bushel at the start of the year, reflects the thinness of America's stocks, sapped by strong demand following a disappointing harvest last year.
Indeed, the country, the top corn producer and exporter, is expected to end 2010-11 with corn stocks sufficient to cover less than three weeks' consumption, forcing buyers to pay up for supplies.
Demand from ethanol plants has been encouraged by high oil prices, while use in feed has been spurred by record livestock prices, encouraging farmers to fatten animals. Meanwhile, exports have been whetted by poor grain crops in many major producing countries last year.
And concerns over corn supplies were enhanced two weeks ago when the US Department of Agriculture revealed that domestic inventories were, as of the beginning of March, 170m bushels below market expectations.
US wheat supplies remain relatively abundant, with domestic inventories of the grain expected to end 2010-11 at 22.8m tonnes, 34% of needs, equivalent to four months' consumption.
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