August 25, 2011

CBOT corn may reach record price next month



Worries over the US crop may cause CBOT corn futures to hit a record price of US$8/bushel in the coming weeks and limit physical supply to Asian markets, according to trading executives and analysts on Wednesday (Aug 24).


Investors will set up fresh long positions on CBOT as US corn quality is not good and yields will likely fall compared with previous years, said a deputy general manager at Japanese commodity brokerage Okato Shoji Co.


Prices may test US$7.60/bushel this week and US$8.00/bushel early next month, he said. At 0252 GMT, CBOT December corn futures were US$0.0175 lower at US$7.4175/bushel.


The US is the world's largest exporter of corn with more than 50% share in global trade, catering to countries such as Japan and South Korea, two of the largest importers.


Traders expect December wheat futures to rise toward US$8/bushel in the next few days from around US$7.80/bushel.


Wheat prices will likely follow corn higher as crop conditions of high-protein spring grades are not good, but gains will be limited by ample supply of lower grades in Black Sea region, they said.


Wheat's premium to corn is poised to narrow, said an analyst. Earlier this year, corn traded at a premium to wheat on CBOT and the same scenario may emerge again, analysts said.


The USDA recently projected the average US corn yield at 153 bushels per acre, with some analysts speculating it may have already factored in recent heat stress.


A Melbourne-based economist said in a research note that taking into account the August weather conditions, corn yields may be even lower at around 150 bushels/acre.


Commodity Weather Group, a private forecaster, put it even lower at 148.7 bushels/acre.


Crop inspection tours indicate a 3-6% reduction in corn yields from a year ago, said an analyst with MaxYield Cooperative in Iowa.


If there is another corn production estimate cut in the US, it will make things very difficult for Asian importers, because unlike previous years, China is now a major buyer, said a trader.


In 2010, China became a net corn importer for the first time in several years, and traders estimate it may have purchased close to four million tonnes in the past six months.

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