September 26, 2007

Strong demand for grain raise prices for US corn, wheat

Soaring prices of corn capped the biggest weekly gain in three months due to strong demand for US grain used in animal feed following the surge in wheat prices and the slump in the dollar.

The price differential between corn and wheat had widened to a record. About 18 percent of last year's world wheat crop was fed to livestock and poultry.

Corn exporters in the US, the biggest producer of the grain, reported sales of 2.03 million tonnes in the week ended September 13, almost double the previous week and the highest since January 2006.

Corn exports are on the rise and the drop in the dollar will help boost sales.

Wheat price has more than doubled in the past year as global demand is forecast to exceed output for the seventh time in eight years.

Wheat was valued at 2.3 times higher than corn, up from the 1.1 ratio in February. The record was 2.6 on Sept. 11.

Corn prices jumped this week after China said it will encourage more imports and less production of fuel made from the grain.

China will restrict industrial use of the grain because domestic supplies may fall short of demand for livestock feed, the National Development and Reform Commission said.

China, the world's biggest pork producer and consumer, will spend 1.5 billion yuan (US$200 million) in the main hog-producing regions to boost output and ease a national shortage of the meat, the government said last week.