January 27, 2012

US corn, soy futures rise on demand hike forecast

US corn futures increased along with soy, on assumption that its demand will also rise as low interest rates strengthen economies' prospects.

The Standard & Poor's GSCI Spot Index of 24 raw materials climbed as much as 1.5%, while the dollar fell to a six- week low against a basket of six currencies. The Federal Reserve said its benchmark rate probably will stay close to zero% at least until late 2014. Brazil's central bank said that there is a "high" chance its key rate will decline.

"There is a tailwind behind the commodity markets because of the central banks' efforts to boost economic growth," Jim Gerlach, the president of A/C Trading Co. in Fowler, Indiana, said in a telephone interview. "The dollar's drop is attracting new speculative investment."

Corn futures for March delivery rose 0.9% to US$6.4025 a bushel at 10:33 a.m. on the CBOT. The price was poised for the sixth straight increase, the longest rally since late December. The grain rose 2% last week on speculation that dry weather will reduce South American yields.

Soy futures for March delivery rose 1.2% to US$12.2775 a bushel. Earlier, the price reached US$12.30, the highest for a most-active contract since January 11.

Rising US export demand and reduced domestic sales from last year's crop by farmers boosted cash bids, bolstering futures, Gerlach said.

Cash corn premiums at export terminals near New Orleans rose to the highest in almost five months, USDA data show. This week, soy premiums climbed the highest since July.

"Cash markets are saying that supplies are tight, and farmers will hold their crops until they see higher prices," Gerlach said.

The US was the world's largest exporter of both commodities in the year that ended Sept. 30, according to government estimates. Corn is the biggest US crop, valued at US$66.7 billion in 2010, followed by soy at US$38.9 billion.