March 7, 2014 / 10:34 PM / 3 years ago

U.S. cash corn bids plunge after big farmer sales

CHICAGO, March 7 (Reuters) - Basis bids for U.S. corn posted their largest declines of 2014 this week after a rally in futures triggered some of the biggest farmer sales since last year's autumn harvest, grain buyers and analysts said on Friday.

Farmers that were holding tightly to supplies left over from a record-large U.S. harvest sold semi trucks full of the grain when cash prices jumped above the psychological threshold of $5 per bushel in much of the U.S. Corn Belt.

Chicago Board of Trade corn futures on Friday rose to $4.95 per bushel, the highest level in six months, in a rally tied to rising export demand for U.S. grain and buying by speculative investors, who expanded their "long" stake in the market to the biggest in about a year, regulatory data showed.

"There's been a major change in ownership," said Roy Huckabay, an analyst at the Linn Group brokerage in Chicago.

The spike in futures came at a time of year when farmers typically boost sales and deliveries as they clean out grain bins before the busy spring planting season. Grain that can be stored safely in the cold can spoil in the bin in warmer weather.

In addition, the U.S. Agriculture Department will release a monthly supply and demand report on Monday followed by acreage and grain stocks reports due at the end of March - releases that can result in wild gyrations in price.

"We are seeing spot activity that rivals late fall harvest when space is filling fast, and we also continue to see lots of corn with moisture," Cargill Inc said in a customer note on the website for their processor in Eddyville, Iowa.

The corn basis, or the amount plus or minus benchmark futures that dealers are willing to pay for the grain, has declined 40 cents since January at a closely tracked processor in Decatur, Illinois, home of Archers Daniels Midland Co .

CBOT corn futures, meanwhile, have increased more than 70 cents from their January lows.

"The continued strength in the futures market has again spurred farmer selling across the country," said Cody Bills, an analyst at Montana-based advisory GeoGrain, which tracks basis bids at thousands of grain processors and elevators across the country.

The average U.S. ethanol basis fell nearly 7 cents this week for the steepest weekly drop this year, Bills said. (Reporting by Michael Hirtzer; Editing by Jonathan Oatis)

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