October 14, 2011


CBOT corn eases despite China's huge order



CBOT corn eased on October 13 despite the confirmation of a huge Chinese import purchase.


USDA officials said that China had purchased 900,000 tonnes of American corn, with a further 292,000 booked to an "unknown" destination, suspected by many traders to be China too.


China was also believed behind an 110,000-tonne order of soy, also put down to "unknown".


The statements followed talk of hefty Chinese purchases of both crops, which on Tuesday (Oct 11) helped drive corn futures up the exchange maximum in Chicago.


GrainAnalyst trader Matthew Pierce said the figure was "an impressive number the trade was looking for to substantiate the recent rally".


"Corn prices should get a boost from the Chinese deal, with more expected in weeks ahead."


US Commodities, saying the export data were "in line with the rumours" which drove prices higher, said further purchases could be in the offing.


"The buying window remains open for China to purchase grain," the broker said, adding that this could increase scrutiny of a USDA downgrade on Wednesday of 50 million bushels, to 1.60 billion bushels, in its estimate for domestic corn exports.


"With the announcement of the sale to China this morning on corn, analysts will now begin to push exports back higher versus the USDA expectations."


The USDA maintained an estimate for Chinese corn imports in 2011-12 of two million tonnes, meaning half may have been undertaken this week alone.


Nonetheless, corn for December delivery fell 3% to US$6.22 a bushel in morning deals in Chicago, a decline blamed in part on "buy the fact, sell the rumour" thinking among investors, before mounting a late revival seen linked to buoyant US cash prices.


"We have seen this before, a strong run-up in prices on speculation of China buying corn and then a drop when the orders are actually confirmed," a UK grain trader told.


Corn also came under pressure from fellow grain wheat, which also struggled for most of the day after the USDA lifted its estimate for world stocks to a 10 year high of 202.4 million tonnes.


Wheat's decline has returned corn to an unusual premium to wheat, which has locked their price fortunes, given that the two are interchangeable in many uses.


The correlation between prices of Chicago corn and wheat futures reached a record high last month, topping 80%.


Corn for December closed down 0.4% at US$6.38 ¼ a bushel in Chicago, where December wheat ended at US$6.18 a bushel, down 1.5% on the day.

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