Corn drops as ethanol fuel inventories increase

An increase in ethanol inventories has sent the price of corn to its lowest level since July.

Corn for March delivery fell 17 cents to finish at $7.03 a bushel Wednesday. That's the lowest since July 6, just about the time that last summer's record-setting drought began pushing corn prices to all-time highs.

The Energy Department reported that fuel ethanol supplies rose 4 percent to 20.8 million barrels last week. That's up 18 percent more than a year ago.

Corn is a key ingredient in the process of manufacturing ethanol vehicle fuel. The increase in supplies indicates that demand could slow, said Sterling Smith, a futures specialist with Citibank Institutional Client Group.

Wheat for March delivery fell 5.5 cents to end at $8.0575 a bushel and January soybeans dropped 2.9 cents to $14.37 a bushel.

In other trading, orange juice futures rose on persistent worries that a freeze could damage Florida's crop. The U.S. Agriculture Department has predicted that Florida's production of early, midseason and Navel varieties will total 67 million boxes, which would be down 10 percent from last season.

Spencer Patton, founder and chief investment officer of Steel Vine Investments LLC, said he isn't sure the steady price increases can be sustained. "I think at some point this is going to have to slow down a little bit," Patton said.

Frozen orange juice concentrate for January delivery rose 1.95 cents to end at $1.4150 per pound. The price has risen about 14 percent since Dec. 4.

Other commodities were mixed as U.S. budget negotiations appeared to hit a wall less than two weeks before tax hikes and government spending cuts are set to take effect.

President Barack Obama said he and House Speaker John Boehner were "pretty close" to a deal. His comments came shortly after the White House threatened to veto Boehner's backup plan for averting the "fiscal cliff."

Gold for February delivery fell $3 to finish at $1,667.70 an ounce. In March contracts, silver fell 55.3 cents to $31.116 an ounce, copper fell 4.8 cents to $3.6055 a pound and palladium rose $7.40 to $698.35 an ounce. January platinum dropped 80 cents to $1,592.90 per ounce.

Benchmark crude jumped $1.58, or about 1.8 percent, to finish at $89.51 per barrel in New York. It was the biggest gain in a month.

In other energy trading, heating oil rose 3.91 cents to finish at $3.0356 a gallon. Natural gas fell 9.8 cents, or 2.9 percent, to $3.32 per 1,000 cubic feet after rising for two straight days. Wholesale gasoline gained 5.22 cents to finish at $2.7431 a gallon.