January 13, 2011

 

CBOT corn and soy reached two-year highs

 

 

Crop futures increased, taking corn and soy to two-year highs in Chicago, after a range of data from US officials indicated further tightness in farm commodities.

 

Corn and soy surged the maximum allowed by exchange rules in early deals in Chicago. Both crops ended 4% higher on January 12 at two-year closing highs, with wheat gaining 1.5%, its first positive close in a week.

 

In Paris, wheat jumped 2.8% to EUR261 (US$342.0) a tonne at one point, also a two-year top, with an upgrade by France to its wheat export forecast also lending support.

 

The price rises followed a string of estimates from the USDA cutting crop supplies, reflecting factors from strong demand for corn from bioethanol plants to Argentina's drought.

 

USDA itself, in unusually direct language, said that corn "cash and futures prices are expected to strengthen".

 

Jaime Nolan at the European office of FCStone, the US broker, said that the "bullish trend" in crop prices "remains fully intact".

 

At US-based Country Futures, Darrell Holaday said, "Overall, all of the numbers were supportive to all of the grains with every number a little supportive."

 

In London, Macquarie analysts said that data highlighted "what can be best described as critically tight US and global corn and soy balances". The bank forecast a "surge" in corn prices to pare consumption back to the level of supplies, with markets needing to "ration soy demand immediately" too.

 

Analysts seized primarily on the USDA's estimate that the domestic corn stocks would more than halve to 745 million bushels at the close of the 2010-11 crop years, a cut of more than 90 million bushels on its previous forecast, and a deeper downgrade than the market had expected.

 

The revision reflected data showing a deeper drop in corn inventories heading into 2011 than anticipated, a cut of 1.5 bushels per acre in the estimate for the American corn harvest, and a lift of 100 million bushels in expectations for the amount of the grain processed by bioethanol plants.

 

The figure leaves corn stocks on course to end 2010-11 at a historically tight level of 5.5% of consumption, a figure beaten only in recent times in 1995-96.

 

The stocks-to-use ratio, which for corn stood at 13.1% at the close of last season, is a key measure of the availability of a crop's supply, and therefore of the prices it can command.