January 19, 2011

CBOT corn surges to a 30-month high as demand increases

US Corn futures escalated to a 30-month high as buyers eagerly bought supplies from dwindling stockpiles because of a 4.9% drop in US output last year.

This left US supply at the lowest in 15 years before the 2011 harvest, the USDA said last week. The agency also cut its forecast for global inventories to 127 million tonnes, the lowest since 2007.

Director of agribusiness for Archer Financial Services Inc, Greg Grow said, "Prices have not risen high enough to slow demand,". "The attitude among consumers is that you have to buy the breaks to accumulate tightening inventories."

Corn futures for March delivery jumped 10.75 cents, or 1.7%, to close at US$6.595 a bushel at 1:15 pm on the Chicago Board of Trade. Earlier, the grain reached US$6.6275, the highest since July 17, 2008.

Prices at US$6 a bushel won't lead to losses from raising hogs, said C. Larry Pope, the chief executive officer of Smithfield Foods Inc, the world's largest pork processor. Corn is the main ingredient in livestock feed.

Cattle futures jumped to a record and hog prices rose to the highest since April on speculation that demand for US meat exports will increase as South Korea culls herds to combat the nation's worst outbreak of foot-and-mouth disease.

Corn futures in China climbed to the highest level in more than two months on speculation that a plan by the government to boost state inventories may reduce supplies available to other users.

"Livestock producers are making money, so we shouldn't see a slowdown in feed demand," Archer's Grow said. "There's some speculation that China may import corn from the US"

Corn, valued at US$48.6 billion in 2009, is the biggest crop in the US, the largest producer of the grain, government data show.