February 2, 2007

Corn falls as livestock producers switch to wheat for feed

Corn prices in Chicago fell the most in a week on speculation that livestock producers were shifting to cheaper sources of animal feed, including wheat.

Corn prices have soared to the highest in a decade, mainly because skyrocketing demand for ethanol production is straining supplies.

With corn prices rising, livestock producers have lately been switching to wheat and sorghum as feed.

As a result, US corn exports last week plunged 20 percent, while wheat exports doubled.

Analysts expect corn exports to fall to 1.5 billion bushels in the marketing year that begins Sept 1, compared with USDA's estimate of 2.25 billion this year.

World corn production in the 2006-07 season, which began Oct 1, would be 687.2 million tonnes, down from 692.9 million forecast in December, the USDA said.

Global consumption would rise to a record 725.8 million tonnes, exceeding supplies for the sixth year in seven and reducing global inventories to 86.4 million, the lowest since 1978, the department said.

Further, Bulgaria and Romania which joined the EU early this year might turn the 27-nation EU into a corn exporter from a traditional importer, according to Rabobank reports.