October 6, 2011

CBOT corn prices expected to increase

CBOT corn is to return to US$7 a bushel, pulling wheat prices higher due to resilient demand from ethanol plants and a potential rise in Chinese imports, according to Credit Suisse.

The bank contrary to Monday's (Oct 3) price downgrades by rival Goldman Sachs, raised its forecasts for futures in Chicago's big three crops, foreseeing a return to US$14 a bushel soy too.

The forecasts centred on corn, for which demand by US biofuel plants "may not end up falling much" even if Washington removes credits on ethanol blending, analysts Ric Deverell and Martin Yiu said.

The separate US ethanol mandate decrees use rising to 15 billion gallons by 2015, ahead of current production rates of 13.6 billion gallons, so supporting production growth, while economics for blenders of the biofuel with gasoline "look favourable".

"Ethanol blending remains viable up to US$7.40 a bushel corn," Credit Suisse said, or US$6.95 a bushel without the tax credit.