December 11, 2009

 

Asia Grain Outlook on Friday: Corn price seen rising next year

 

 

Corn prices will probably continue consolidating in the next few weeks into the next year, but improving demand and commodity index rebalancing are pointing to gains in 2010.

 

"Fundamentals are not favorable now for a spike, but next year, it will be better, and I think corn prices are going to rise," said Hiroyuki Kikukawa, head of research at IDO Securities in Tokyo.

 

Chicago Board of Trade December corn futures ended at US$3.77 1/4 per bushel Thursday.

 

Although concerns over how this week's Midwestern snowstorm might affect the U.S. crop is helping market sentiment right now, analysts said there are a few factors that can drive prices higher next year, even if the weather impact is limited.

 

Market participants said the combined weightings of corn in the Dow Jones-UBS Commodity Index and the S&P Goldman Sachs Commodity Index would increase by 8% in the rebalancing at the start of 2010.

 

"Who wants to get too short knowing the funds are coming in three weeks?" said Mark A. Gold with Top Third Ag Marketing.

 

Looking ahead, Rabobank in a research report Wednesday said it expects record demand for U.S. corn next season on higher ethanol use and recovering feed and export demand.

 

"Based on current expectations, U.S. corn fundamentals indicate a bullish scenario for prices over the coming season," with the stocks-to-use ratio estimated to fall next year to its lowest level in a decade, it said in a research report Wednesday.

 

The average price of the CBOT futures in the first quarter of next year is forecast by the house at US$4.0 a bushel, and US$4.2 in the second and third quarters.

 

Meanwhile, new data indicated that China, traditionally a major exporter on the international market, continues trimming its shipments.

 

The country said Friday its exports in January-November fell 60% on year to 93,340 tonnes, from 4.91 million tonnes in 2007 and 3.07 million tonnes in 2006.

 

Analysts in China do not expect the country to return to being a major exporter, as the government vowed to ensure domestic consumption, give the quick increase of feed and industrial usage.