October 22, 2007

 

Mexico Cash Grains: White corn prices edge higher on US market

 

 

Physical trading continued at slow pace this week in the Mexican cash grains markets as local speculation led to white corn prices starting to climb after four months of stability, traders said Friday (October 19).

 

As US prices for imported soy products and wheat remained at close to record highs, Mexican traders and producers speculated that the price for surplus production from the Sinaloa white corn harvest would rise as well.

 

"We haven't seen much business at all; nobody wants to place any orders unless they absolutely have to in order to cover contract obligations," said one Mexican physical trader by telephone from Mexico's northern grains belt.

 

The 2006/07 fall-winter white corn harvest from Mexico's top commercial producing state of Sinaloa ended in late August with record output, ending up 16 percent at 4.76 million tonnes.

 

While initial selling of the Sinaloa harvest was active amid a tight supply in the Mexican market for the key raw material for the main staple tortilla, a thin pancake made out of white corn, selling later slowed despite healthy stocks still reported to be held in warehouses.

 

Traders' bids were below selling ideas by producers who wanted higher prices as speculation continues in world markets over the availability of surplus corn during the next 12 months following the diversion of US surplus corn to the booming ethanol industry rather than traditional export markets.

 

Traders are now eyeing physical business from the spring-summer white corn harvest in the central part of Mexico which is known as the "Bahio region," primarily comprising the crops from Jalisco and Guanajuato states.

 

Harvesting of the Bahio crop normally starts during the second half of October and the harvest is Mexico's second most important after the Sinaloa harvest. There have been no reports of weather problems, and forecasts call for a stable Bahio crop of about 3 million tonnes.

 

Corn and wheat futures closed mixed Friday at the Chicago Board of Trade (CBOT), with active December corn closing 3 cents higher at US$3.70 1/4 cents per bushel while December wheat settled up 30 cents at US$8.55 1/2 a bushel.

 

Soy products, meanwhile, ended weaker on Friday with active November soy down 8 1/4 cents at US$9.83 1/4 a bushel and with December soymeal futures US$1.80 lower at US$276.30 per short tonne.