Corn retreats after rally on lower-than-expected US stockpiles

Chicago corn futures declined on Tuesday, after reaching a three-month high in the previous session when a U.S. government estimate of corn stockpiles fell short of trade expectations, triggering a rush of short-covering.

Soybean and wheat futures also fell.

The most-active corn contract on the Chicago Board of Trade (CBOT) ZC1! was down 0.4% at $4.23-1/4 a bushel by 0643 GMT, after climbing to $4.28 on Monday, its highest since June 27.

CBOT wheat ZW1! was down 0.9% at $5.78-3/4 a bushel and soybeans ZS1! fell 0.8% to $10.48-3/4 a bushel.

All three contracts hit four-year lows in recent months due to plentiful supply, but have since recovered some ground.

The U.S. Department of Agriculture said on Monday that U.S. farmers and merchants held 1.76 billion bushels of corn as of Sept. 1, up 29% year-on-year and the most since 2020, but below analysts' expectations of 1.844 billion bushels.

The data showed demand for corn in feed and ethanol was stronger than thought, but did little to change market fundamentals, with speculators fuelling the price gain, StoneX analyst Bevan Everett wrote in a note.

The USDA also said the U.S. corn harvest - set to be the second biggest in history - was 21% complete, slightly below analysts' expectations.

The large harvest and stocks should suppress prices, said Andrew Whitelaw at agricultural consultants Episode 3.

"We have a massive crop and also a period where a lot of farmers haven't sold that much. Selling will come at some point, and we could see that over the next few months," he said.

However, analysts at JPMorgan were bullish on corn, pointing to lower production in Ukraine and Russia following dry weather, less corn planting in Argentina after a leafhopper insect infestation, and low rainfall in parts of the Americas.

"We continue to look for lower revisions to the USDA's U.S. yield projections over the months ahead," they said.

Meanwhile, U.S. Sept. 1 soybean and wheat stocks rose and were the largest since 2020, the USDA said, but traders are concerned by dry weather in top soy producer Brazil and top wheat exporter Russia.

Wheat export prices in Russia rose last week, though the pace of shipments also picked up.