February 18, 2010

US corn and soy futures climb on slow sales

Corn jumped to a four-week high and soy rose for a fourth straight session after US farmers curbed sales following a price slump earlier this year, tightening supplies for export and for producing animal feed and fuel.

Average US prices for both crops sank 11% this year through February 10, data from the Minneapolis Grain Exchange show. The declines gave growers less incentive to sell, leading to tighter supplies for shippers and processors. Snow and cold weather in much of the US has also slowed transportation of supplies from grain silos.

"Farmers have quit selling until prices rally," said Chad Henderson, a market analyst for Prime Agricultural Consultants Inc. in Brookfield, Wisconsin. "Corn will probably need to rally 15 cents and soy will need to rise 40 cents to entice farmers to sell more."

Corn futures for May delivery rose 5.75 cents, or 1.5%, to US$3.79 a bushel on the Chicago Board of Trade. Earlier, the pride touched US$3.805, the highest level since January 14. The most-active contract, which rolled from March to May on February 10, climbed 6.2% last week.

Soy futures for May delivery jumped 20.5 cents, or 2.1%, to US$9.745 a bushel, the fourth straight gain. The May contract, which became the most-active futures on February 10, rose 3.2% last week, snapping a five-week decline.

Prices also rose after crude-oil futures jumped as much as 4.2% in New York, increasing demand for alternative fuels made from crops, Henderson said.

Hedge-fund managers and other large speculators held a net- short position of 4,563 contracts as of February 9, the first cumulative bets that prices would fall since September, data from the Commodity Futures Trading Commission show. They held a net-long position of 185,538 contacts on Jan. 15, the largest bet on rising prices since June 2008.

Meanwhile, in soy, large speculators increased their net-short position to 36,228 contracts in futures and options traded in Chicago in the week ended February 9, the biggest bet on lower prices since October 2006, according to reports.

The US is the world's biggest producer and exporter of corn, the country's largest crop, and soy, the second- largest, according to government data.