US corn prices may rebound amid weather threats

 

 

The record pace of US corn sowings has lulled investors into underestimating weather threats, which would provoke "aggressive investor buying" and a rebound in prices, according to reports.

 

Early plantings do not necessarily lead to high yields, the research group said in a report, noting 2006, when 70% of the US corn crop was sown by early May.

 

According to the report, yield ended up below trend that year at 149.1 bushels per acre due to dryness in late July and August. A shortfall this year from the yield of 160.5 bushels that many traders are expecting this year could make a marked difference the tightness of US corn supplies.

 

A return to "normal" weather, after a series of summers blessed by relatively cool Julys and rainy Junes, would cut yields to 157 bushels per acre, Hightower said, quoting University of Illinois research.

 

At that yield, US corn stocks would end 2010-11 at 1.41 billion bushels, some 285,000 bushels short of current market thinking.

 

At the average yield of 153.3 bushels per acre over the last five years, stocks would finish at 1.11bn bushels, the lowest for seven years. As a proportion of use – a key metric for measuring market tightness, which in turn has a big impact on prices - these inventories would come in at 8.3%, the lowest figure since 1973.

 

The corn market is a prime candidate to attract aggressive investor buying interest on any sign of supply disruption or any turn up in demand that is not currently expected, the report said.

 

Demand shocks could include further buying by China, which the group predicted could hit 4-5 million tonnes this year.