May 12, 2010

Smaller inventory forecast lifts US corn prices

Corn prices rose after a report from the US government stated inventories will be smaller due to improved demand.

Previously, corn prices had fallen 9% on expectations of a record US crop.

The report stated that reserves before this year's harvest will total 1.74 billion bushels, less than the 1.9 billion projected last month, because of increased use of corn in ethanol and rising exports to feed livestock.

Corn futures for July delivery rose 1.8% (6.5 cents) to US$3.77 a bushel on the CBOT, the biggest gain since April 28. The most-active contract rose 8.8% in April, due to China's nine-year record purchase of 115,000 tonnes of US corn last month.

Most-active corn futures are trading on the Dalian Commodity Exchange at US$7.2269 a bushel, despite a forecast 11-million-tonne increase in Chinese corn production over last year. Mark Shultz, Chief Analyst for Northstar Commodity Investment Co., believes that so long as the premium to US corn is maintained, the Chicago market will continue to rise.