September 14, 2010

US corn prices may hit US$6 by year-end

Corn prices may reach US$6 per bushel by the end of year, boosted by the US government's larger-than-average cut in US corn yield on Friday (Sept 10) and strong global demand, reported trade house Morgan Stanley Monday (Sept 13).

The USDA on Friday (Sept 10) estimated US corn ending stocks next year would fall to the lowest level in 15 years and the stocks-to-use ratio could drop to 8.3%, the smallest since 1995/96 or about the equivalent to one month's consumption.

CBOT spot corn futures prices <Cc1> were trading above US$4.70 a bushel on Monday (Sept 13), up 45% from their summer low on June 29 and near a two-year high. Prices hit a record high of US$7.65 in 2008.

Several deferred CBOT contracts had already broken above psychological resistance at US$5 per bushel. At 11:30 a.m. CDT (1630 GMT), CBOT September <CU0> was up US$0.06 at US$4.70 per bushel, and May <CK1> was up US$0.05 at US$4.99-3/4 per bushel.

Researchers at Morgan Stanley said that if the USDA's new yield estimate proves optimistic (162.5 bushels per acre, down 2.5 bushels per acre from the government's August forecast), corn prices will need to increase to above US$6 per bushel to ration demand.

Moreover, if respected private forecasts calling for yields to ultimately fall to 158.5 bushels per acre are accurate, the stocks-to-use ratio would fall to an untenable 5.8%, the Morgan Stanley report stated.