October 8, 2008

US corn prices fell to a 10-month low as global livestock producers are expected to use more wheat as a cheaper feed grain alternative.

CBOT corn futures for December delivery fell 1.7 percent to US$4.17 per bushel. Prices of soft red winter wheat is 21 cents per bushel more expensive than corn in parts of the Midwest, compared with an average price of US$2.82 per bushel in the past year, reducing corn demand in US livestock operations, according to Charlie Sernatinger, a market analyst for Fortis Clearing Americas LLC in Chicago.

Wheat prices have dropped 55 percent while global wheat output is expected to soar 11 percent to 676.3 million tonnes in the year starting June 1. The USDA said corn inventories on September 1 totalled 1.6 billion bushels, up from 1.576 billion estimated on September 12, reflecting a lower corn demand. USDA data also showed that corn exports have declined 37 percent in the current marketing year.

Export demand is miserable for corn and more of the global wheat crop will be fed to livestock at the expense of US corn, said Sernatinger.

USDA expects corn feed demand to fall 14 percent for the current marketing year that begun September 1, and export sales have declined to 13.5 million tonnes from 21.5 million tonnes a year ago as of September 25.

Implied demand for corn feed fell 12 percent to 738 million bushels in the quarter that ended August 31, down from 837 million bushels in the same period last year, Sernatinger said.

Corn is the biggest US crop, with a record high value of US$52.1 billion in 2007.