Chicago corn futures rally on lower supply estimate

15:14, September 11, 2010      

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Chicago corn futures rallied to a 23-month high on Friday, as the U.S. Department of Agriculture ( USDA) announced that the U.S. corn supply will sink to its tightest in 15 years next year as the hot dry weather last month reduced U.S. corn yields. Wheat and soybean both dipped.

December corn added 7.5 cents, or 1.6 percent, to 4.7825 U.S. dollars per bushel. December wheat dipped 1.25 cents, or 0.2 percent, to 7.3675 dollars per bushel. November soybean lost 15 cents, or 1.4 percent, to 10.31 dollars per bushel.

USDA has lowered the average U.S. corn yields to 162.5 bushel per acre, from 165 bushels per acre on its August report. And the corn production was cut to 13.160 billion bushels from 13.365 billion bushels last month. USDA pegged 2010/11 corn ending stocks at 1.116 billion bushels, which is higher than analyst's expectation around 1.11 billion bushels, and much lower than last year's 1.312 billion bushels.

Traders noted that although the reduction in corn yield estimates is considered obviously supportive of corn, last week's export sale of corn only reached 680,200 tons, which is much lower than the upbeat data in recent weeks. Meanwhile, last week's wheat export sales totaled 1,613,400 tons, which has reached the highest level in three years due to strong demand of Egypt, the world's largest wheat importer. USDA has cut its estimates for overall wheat productions only by 2.72 million tons, which is much lower than trade expectation. USDA also slashed its forecast for total world usage by about 1.5 million tons, which resulted in a surprise increase in 2010/11 world wheat ending stocks. Wheat retreated for the third consecutive day as the USDA report eased investors' concern that the world may face a repeat of the 2008 world food crisis.

Traders indicated that the USDA supply and demand report was also considered negative for soybean, since USDA raised its estimates for soybean yields while traders expected a slight decline. And USDA only cut the 2010/11 ending stocks by 10 million bushels, which is much lower than analyst's expectation of 75 million bushels.

Source: Xinhua


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