December 22, 2010

 

CBOT corn gains for fifth day on dry weather concerns

 

 

CBOT corn advanced for a fifth straight day on concern that dry weather in Argentina may threaten crops in the world's second-largest supplier of the grain.

 

Temperatures exceeding 100 degrees Fahrenheit (38 Celsius) will boost plant stress in Argentina, according to the Commodity Weather Group LLC. While rainfall will prevent severe dryness in most of Brazil, there's an increasing threat of too much moisture, the Bethesda, Maryland-based forecaster said.

 

"Hot, mostly dry weather, in Argentina is fueling concerns about the crop there," said an analyst. "There is a worry that farmers will not be able to plant enough corn in 2011 to prevent supplies from becoming completely tight."

 

Corn futures for March delivery rose as much as 0.4% to US$6.045 a bushel in Chicago, the highest for the most-active contract since November 9. Prices have climbed 46% in 2010.

 

"Corn will drive the grains complex in 2011 as it has the largest potential price upside given its risk exposure to inventory tightness, policy intervention, and energy prices," another group of analysts said.

 

Global corn stockpiles-to-usage levels are forecast to end 2010-2011 at 10.3%, the lowest level since 2003-2004, if China's "official" stockpiles are excluded, analysts said.

 

"Corn, wheat, and soy supplies appear sufficient this season but our outlook suggests that record crops are needed in 2011-12 to keep inventories from tightening," the bank said.

 

Argentina's soy crop may plunge as much as 21% next year as drought delays planting. Output in Brazil's southern Rio Grande do Sul state may be 20% smaller because of dry conditions related to a La Nina weather pattern, according to forecaster Somar Meteorologia.

 

March-delivery soybeans gained as much as 0.2% to US$13.4025 a bushel, the highest level since November 12. Prices have advanced 27.5% this year on record Chinese demand.

 

Wheat output in New South Wales, Australia's largest grain- producing state this season, may decline by 5% because of flooding and heavy rain. Production may be 8.75 million tonnes compared with an October outlook for 9.21 million tonnes, Industry & Investment NSW said in a report on its website today.

 

Wheat futures for March delivery dropped as much as 0.6% to US$7.6025 a bushel in CBOT, reversing an earlier gain. Prices have advanced 40% this year on drought in Russia and concern that high-quality grain will be in deficit.