Corn prices plummeted Tuesday as farmers reported larger-than-expected crops this year, easing some fears of rising food costs. Concurrently, Beijing has announced that China will bar imports of U.S. poultry.
The U.S. Department of Agriculture said Tuesday a record 77.5 million acres of soybeans were planted through June, up 1.8 million acres from last year.
Farmers also planted 87 million acres of corn, up 1 million acres from last year and the second-largest corn acreage in more than 60 years.
After the report, corn traded down about 8 percent at $3.47 per bushel on the Chicago Board of Trade.
The unexpected boost in planting could mean crop supplies won't be as tight this year as many analysts feared a few months ago. Lower commodity prices would be welcomed by ethanol makers and meat companies that have been stung by higher feed prices over the last two years.
The USDA also reported a bigger supply of corn reserves on hand than many analysts expected. About 4.27 billion bushels of corn are stored on farms and grain bins, up 6 percent from last year and above the 4.18 billion bushes analysts had predicted, according to CME Group, with the Chicago Board of Trade.
The boost in supply is reinvigorating ethanol producers, who are slowly starting to ramp up production and look at reopening plants that were shut down last year, when grain prices skyrocketed and oil prices crashed, said Brian Basting, commodity research analyst at Advance Trading in Bloomington, Ill.
"It appears to be a slow healing process" in the ethanol industry, Basting said. "We're seeing the (profit) margins creep back into positive territory."
The robust planting came as a surprise, after rainy weather in the eastern Corn Belt caused farmers to delay planting because the ground was too soggy. But losses in those states appear to have been offset by perfect weather in western states like Nebraska, Iowa and Minnesota, said Greg Wagner, senior commodity analyst with Chicago-based AgResource.
Slideshow:
"Those crops, at least today, are looking in great condition," Wagner said. But he warned late planting in several states could still make this year's crop susceptible to drought or heavy rains. "We know these crops are lagging in maturity, so we need to find out what the weather patterns are going to be."
Cotton planting, meanwhile, was at a 25-year low. Farmers planted about 9 million cotton acres this year, their fewest since 1983, with growers in Mississippi and Louisiana planting their smallest acreages on record. There was also a 46 percent decline in upland cotton acreage in California, where scarcity of irrigated water has been a persistent concern.
China Retaliates, Says No to American Chicken
Traders in Chicago turned their attention to China, the top overseas market for U.S. chicken, which told American poultry producers it will stop importing their chicken, a move that is in retaliation for Washington preventing Chinese chicken imports, a U.S. poultry trade group said on Tuesday.
While there has been no official statement from Beijing, the USA Poultry and Egg Export Council said the Chinese began telling U.S. producers overnight that import permits will not be issued for U.S. poultry.
"We have nothing in writing from the Chinese government, but it has been verbally acknowledged that this is being done," said Jim Sumner, USAPEEC president.
China just recently surpassed Russia as the top export market for U.S. poultry, taking about $372 million worth in the first half of this year, of which most was chicken, USAPEEC said.
In April, China launched a dispute with the World Trade Organization against the United States regarding the limiting of poultry imports from China.
"This is a very incendiary issue with China," said Sumner.
Slideshow: