Supply anxiety rekindled, US corn rose sharply

The Chicago Board of Trade (CBOT) corn futures market closed higher on the 10th as heat waves threatened corn production in Argentina, the world’s second-largest grain exporter, and analysts lowered Argentina’s corn crop forecast. The most active CBOT March corn futures closed up 12 cents, or 2%, to close at $6.07 per bushel.

After the corn futures market fell 5.4% last week, concerns over the Argentinean corn crop rekindled market supply concerns. The thrust of the rise in the price of corn futures is the fear of a decline in corn production in Argentina and the possibility of a shift in demand to the United States. The US Department of Agriculture is expected to become the new agency to reduce Argentine corn production forecasts on the 12th, mainly due to the continued high-temperature dry weather in Argentina, which is crucial for pollination.

Since the US Department of Agriculture announced its previous production forecast, analysts have been reducing Argentine corn crop estimates. Analysts surveyed by the media expect the USDA’s Argentine corn production to be estimated at between 19 million and 24 million bushels. Government agencies have traditionally slowed down estimates rather than the private sector.

Shawn McCambridge, a senior cereal analyst at Prudential Bache, said he believes the US Department of Agriculture's crop report on the 12th will show that the Argentine corn crop is expected to be cut "two million tons." Importers have been hoping that Argentine corn can achieve high yields to make up for the smaller-than-expected corn crop in the United States in the autumn. This hope is falling because the expected temperature this week will be above 90 degrees Fahrenheit and may reach 100 degrees Fahrenheit.

According to Informa Economics, a private analyst firm, global corn plantings in 2011/12 are projected at 162.7 million hectares, which is higher than the 160.2 million hectares of the previous year. Global corn production in 2011/12 may reach 863.8 million tons, compared with 825.8 million tons in the previous year.

Dalian corn futures fell slightly on the 10th. The closing price of the main 1109 contract was RMB 2,306/ton, down RMB 10/ton. At present, the domestic corn futures market is flat and the market lacks information guidelines. In the face of policy pressures, the low-end consolidation pattern will continue. However, taking into account the domestic production costs and supply and demand expectations, corn prices continued to fall sharply is unlikely. Overnight, the foreign exchange market closed sharply higher, or boosted the domestic corn market.

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