November 5, 2010

 

US corn sales hurt by prices, feed wheat stocks

US corn export sales fell 16% last week and were near the low end of trade estimates as elevated prices and plentiful global supplies of feed wheat kept a lid on demand, trade sources said Thursday (Nov 4).

 

Meanwhile, export sales of US wheat last week topped estimates, largely due to solid demand for higher-protein wheat such as hard red winter and spring wheat, they said after the USDA's export sales report.

 

Poor weather in some key exporting countries this year has resulted in greater supplies of feed-quality wheat around the globe and less milling wheat, which has supported demand for higher-grade US supplies.

 

"There is feed wheat available around the world and that has contributed to the disappointing numbers that we have seen in corn sales. The higher quality (wheat) supplies are moving out of the US and feed quality supplies are moving out of other locations. That is going to impact demand for corn in general," said Prudential Bache Commodities analyst Shawn McCambridge.

 

According to USDA data, US wheat export sales last week exceeded corn sales for the third consecutive week and the fourth time in the last five weeks.

 

South Korea, normally the third largest market for US corn, has been a particularly active buyer of feed wheat, which is currently about US$5 per tonne less expensive than US corn shipped to the country, traders said.

 

South Korean importers have also sourced cheaper corn from South Africa, they said.

 

US corn export sales totalled 461,600 tonnes in the week ended October 28, near the low end of trade estimates for 450,000-650,000 tonnes. Japan, the top US corn market, bought 126,700 tonnes, while South Korea bought just 3,000 tonnes, USDA data showed.

 

Export sales in the September 2010-August 2011 marketing year to date remained 13% ahead of last year.

 

But the weekly pace of sales has slowed of late so some traders expect USDA to trim its 2010/11 export forecast from 50.8 million tonnes in its monthly supply/demand report next Tuesday (Nov 2).

 

Corn futures <Cc1> on the CBOT surged to a near 26-month high on Thursday (Nov 4) as the dollar <.DXY> plunged after the Federal Reserve announced plans to buy US$600 billion in government bonds to help stimulate the US economy.

 

Rising corn prices may limit importer demand, although the weaker dollar, which increases the buying power of those holding other currencies, does offset some of those gains.

 

Export sales of US wheat last week totalled 565,600 tonnes for shipment in the June 2010-May 2011 marketing year and 44,000 tonnes for 2011/12, above trade expectations for combined marketing year sales of 400,000 to 600,000 tonnes.

 

Marketing year sales to date are 51% ahead of last year as a Black Sea drought, which prompted a Russian ban on grain exports through mid-2011, and rain-damaged crops in Canada, Germany and Australia have bolstered demand.