Corn futures tumbled last week as bigger-than-expected US crop inventories provided an unexpected surprise for markets.
 
An inventory of 1.13 billion bushels was recorded for the end of the crop year, 162 million bushels more than anticipated. Not only was the level higher than anticipated, it represented a significant change from forecasts that stocks would shrivel to their lowest levels in 15 years. The news sent corn prices down from $6.32 per bushel to $5.92, putting the commodity on track for its worst month since 1996. Goldman Sachs (which has been busy cutting forecasts for most assets this week) reduced its price estimate, with the three- and six-month target slashed by $1.20 to $6.15 per bushel, while the 12-month forecast was reduced by $1.50 to $5.50.
 
The bank sagely noted that high stocks of corn would reduce the need for ‘demand destruction’, adding that the figures suggested that consumption of grain by livestock farms had fallen in the third quarter to the lowest level on record. Prices recovered slightly at the beginning of this week, aided in part by Fed chairman Ben Bernanke, who said in testimony to a congressional committee that the Fed still had the option of further monetary stimulus to support the economy (although he added the cautionary point that they did not yet see a need to intervene). The recent plunge in prices may also prompt livestock farmers and ethanol producers to step up their corn purchases in a bid to take advantage of lower costs for raw materials.