November 13, 2006

 

US corn sales remain strong despite high prices

 

 

Despite a reduction in projected 2006/07 US corn exports in Thursday's US Department of Agriculture supply and demand report, a signal that the government expects the high price of corn to ration demand, recent weekly export sales have not yet signalled any decline in sales, analysts said.

 

"Rationing of demand has not occurred in anything we've seen so far," said Don Roose, president of US Commodities in West Des Moines, Iowa.

 

December corn futures settled at US$3.50 cents per bushel Thursday, rallying over US$1.00 since mid-September.

 

Thursday's weekly corn export sales totalled 1.929 million tonnes for the week ended Nov 2, the highest level of weekly sales since September 2004, according to the USDA's Web site.

 

The USDA trimmed its export forecast by 50 million bushels to 2.2 billion bushels Thursday as it noted that recent high prices are expected to slow the pace of corn sales and shipments later in the marketing year as supplies are expected to tighten as surging demand from ethanol producers has trimmed US corn supplies.

 

The USDA sent a quick signal that the US is rationing demand when it trimmed the feed usage and export demand by 50 million bushels each, Roose said. The government is trying to tell the market that prices are rationing demand but so far there has been no evidence of this, he added.

 

It was a little surprising that the government trimmed the export estimate, given the recent strong demand, said Terry Reilly, grains analyst with Citigroup Global Markets Inc.

 

Analysts note that the strong sales pace could be a sign of "front loading" demand by traditional customers, ahead of any perceived supply tightness.

 

Front loading occurs when export customers purchase a large amount of supply early in the marketing year instead of spreading purchases out across the calendar, securing supplies earlier than normal.

 

Over the past several weeks, traditional customers including Japan, South Korea and Mexico have purchased large amounts of US corn, with those three countries accounting for more than 45 percent of the export sales for the week ended Nov 2.