October 22, 2010

 

Jump in US corn prices raises speculation of fresh Chinese imports

 

 

A jump on Wednesday in Chicago corn prices, which at one point touched the maximum limit allowed by the exchange, reflected persistent talk that China is once again buying US corn, according to analysts.

 

Rumours are "rampant" in Chicago that China has resumed imports of corn, amid a growing belief that officials are, for a second year, significantly overoptimistic in their harvest forecasts.

 

Similar rumours in May, ahead of official confirmation that China was importing significant quantities for corn for the first time in some 15 years, provoked significant volatility in prices of the grain.

 

Speculation has centred on trading in options giving the right to sell December corn at US$5.50 a bushel, below current market prices but potentially useful as a hedge, and on claims that China has bought 1 million tonnes of corn.

 

Separately, some analysts also revealed that it had cut to by 2 million tonnes to 153 million tonnes its forecast for the country's corn crop, citing early frost in the main growing region of the north east. A harvest at this level would imply a shortfall of 5m tonnes in domestic production, a second year of significant deficit.

 

Analysts pegged last year's crop at less than 140 million tonnes, compared with consumption of 155 million tonnes, boosted by a swelling livestock industry.

 

The production estimates differ significantly with official figures for Chinese output of a record 169m tonnes of the grain this year, after a 164-million-tonne crop last year.

 

However, soaring prices have lent support to the idea that supplies are tighter that government data implies, with many corn futures on China's Dalian exchange setting fresh record highs on Thursday.

 

The near-term November lot closed at RMB1,996 (US$300) a tonne, equivalent to more than US$7.60 a bushel.

 

Nonetheless, corn prices fell back in live trading in Chicago on Thursday, after USDA data showed that only 212,500 tonnes of the grain was sold for export in the latest week, less than half the expectation of most traders.

 

Corn for December slipped 1.6% to close at US$5.64 ¼ a bushel.