May 2, 2012

 

 

With soy topping the key threshold of US$15 per bushel for the first time in nearly four years, US corn and soy futures rallied on Friday (Apr 27) on strong export demand, traders said.    

 

Corn futures led the way higher, adding nearly 5% on heavy buying by investors who had already been concerned about dwindling supplies of corn in the country before the latest export news.  

 

The USDA on Friday morning confirmed the largest one-day sale of US corn since 1991. The transaction totalled 1.56 million tonnes, and while the USDA did not identify the buyer, grain traders said the bulk of it was bound for China.      

 

"The sales are just a catalyst to spur the buyers into the market," said Bill Gentry, a broker for Risk Management Commodities.   

 

The USDA also said exporters had sold 110,000 tonnes of US soy to China and 116,000 tonnes to an unknown destination for 2012-13 delivery. Although the bulk of the sales were for new-crop delivery, the front-month contracts still needed to rally to entice farmers to loosen their grip on crops they have been holding since harvest to meet 2011-12 demand.   

 

"Farmers are spending their time planting crops versus hauling any product," said Mark Schultz, chief market analyst for Northstar Commodity Investment Co. "The old crop is still extremely tight and end-users are looking for corn."     

 

Demand for US corn has been particularly hot this week. The USDA has reported total sales of 2.8425 million tonnes with prices at two-month lows.   

 

Chicago Board of Trade May soy rose US$0.155 to US$14.96-3/4 a bushel. The front-month contract, which traded above US$15 a bushel for much of the session, rose to its highest level on a continuous basis since July 18, 2008.     

 

CBOT May corn gained US$0.29 to US$6.53 a bushel, hitting its highest price since April 9. The May-July corn spread widened to its highest level ever as tight supplies prompted traders to bull-spread the market.   May corn surged through key technical resistance at its 50-day and 100-day moving averages during the session. 

First notice day for corn deliveries was coming up on Monday, which contributed to the bullish atmosphere hanging over the market. Traders, who were expecting zero deliveries of corn, soy and wheat, scrambled to cover short positions ahead of the delivery period, when the market trades without limits.  

 

"Nobody really wanted to stay short over the weekend," said Jon Marcus, president of Lakefront Futures and Option. "Nobody is taking any weekend exposure."   

 

CBOT May wheat ended up US$0.1625 at US$6.42-1/4 a bushel, mostly due to spill over support from the corn market. Soy prices rose 3.4% this week. The front-month contract, which is on a five-week winning streak, has posted gains in 10 of the last 11 weeks. The market has put on 9.6% during the current winning run.    

For the week, CBOT corn rose 6.9% and posted its biggest weekly gain in 11 months. Wheat prices were up 4.1% for the week, snapping a three-week losing streak. Waning expectations for crop production in South America added further support to prices.    

 

"The soy market remains well supported," a European dealer said. "People are continuing to track crop estimates in South America and the weekly US exports were very decent."   

 

One of Argentina's biggest grains exchanges cut another million tonnes each off its 2011-12 soy and corn crop forecasts as poor yields dimmed expectations half-way through harvesting.

    

The Buenos Aires Grains Exchange reduced its soy harvest estimate to 43 million tonnes, 13% less than last season, due to the impact of a six-week drought in the world's No. three soy supplier during the height of the Southern Hemisphere summer in December and January.   

 

Wheat prices also were supported by the International Grain Council's cut in its 2012-13 global wheat forecast. The IGC trimmed its outlook by five million tonnes to 676 million tonnes.