April 12, 2011

 

US corn prices hit record high

 

 

Foreign buyers of US corn may retreat in the face of record high prices, while demand from domestic producers of ethanol and livestock is likely to remain strong.

 

Farmers and grain traders are trying to estimate changes in global corn consumption in the wake of a 10-month rally in futures, which set record highs this week. Demand has been the primary driver of the price surge, with US supplies expected to fall to a 15-year low before this year's harvest commences.

 

"The sector that has to back off is going to have to be the export sector," said Brian Hoops, president of Midwest Market Solutions, a brokerage firm in South Dakota.

 

Last Thursday (Apr 7) signalled slowing US corn exports. Federal officials said that exporters sold 619,600 tonnes for the week ended March 31 for delivery before the next harvest, down 43% from the prior four-week average, according to the USDA.

 

Hoops said that the US might see poor export sales for the next month following the surge in corn prices. Buyers may wait to see whether prices continue to climb and if they can defer purchases or buy from other countries.

 

Demand for corn to make ethanol and livestock feed is expected to stay strong.

 

Meat production and commercial egg hatcheries set nearly 208 million eggs in the week ended April 2, up 2% from a year ago, indicating that producers have not cut purchases of corn for feed.

 

The greater test for exports will come next Thursday (Apr 21), when federal data will cover the period when futures broke through record highs set in 2008. The most recent price jump came after the USDA said corn inventories as of March 1 were lower than expected. Corn futures have soared 16% since then to record highs above US$7.70 a bushel.

 

Foreign buyers will still be interested in US corn, said Jack Scoville, vice president of Price Futures Group, a brokerage in Chicago.

 

Substantial US wheat export sales revealed that with fuelled speculation, foreign buyers may turn to feed wheat instead of feed corn. Wheat prices have not surged as much as corn, as supplies are available.

 

Corn prices is not the only factor determining US corn imports, as fluctuations in the value of the US dollar plays a major role as well. "I don't foresee, at this point, exports dropping off necessarily. The demand is there," said Tom Sleight, vice president of operations and membership for the US Grains Council, which promotes grain exports abroad.