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24-4-2008 | Other news

According to Rabobank’s Soft Commodities Monthly Report, the corn market will increasingly focus on weather and plantings pace in the US over the next couple of months. Prices are likely to remain extremely volatile and bullish on any adverse seasonal conditions through this period. US domestic demand for corn used in ethanol production is forecasted to climb to nearly 33% of production in 2008/09.

• USDA Prospective Plantings report March 31st indicated an 8% decline in US corn plantings in 2008.
• CBOT corn prices reached fresh highs of over USD 6.00 per bushel by mid April.
• Significant corn crops forecast in Brazil and Argentina in 2007/08 season, despite early season weather concerns.    

Corn prices
Corn prices have mounted a strong challenge to the rest of the grains and oilseeds complex in recent months after being outperformed for much of 2007. Since mid-March, corn prices have been one of the shining lights in agricultural commodity markets, regaining all lost ground in the correction and surging to fresh highs.

World corn fundamentals
World corn production is forecast to exceed consumption for the first time in three years in 2007/08, due to a 10% increase in production, with larger crops expected in the US, China and South America.

Corn and ethanol demand
Demand growth for corn continues unabated with corn use for ethanol in the US forecast to increase 51%, year-on-year, reaching 24% of annual production in 2007/08 up from 20% in the previous season. 

US
Weather will become a focus over the next couple of months as corn plantings take place. Current December 2008 corn futures contract highs reflect a price that might ration both feed and ethanol demand and also incorporate a significant weather premium moving into the crucial planting period.

Brazil 
Brazilian corn production is forecast to reach a record level. Total annual production will be heavily dependent on final plantings for the second corn crop of the double crop rotations. First crop corn and soybean harvests have run later than normal placing timing pressure on Brazilian farmers to get the second corn crop planted in time. 

China 
A rapid decline in domestic stock levels has seen China’s position as a major world exporter come to an end. Surging domestic animal feed demand and government measures to curb exports through prohibitive taxes are forecast to result in a 91% drop in Chinese corn.  In 2008/09, China is again not expected to significantly contribute to world supplies due to only minimal exports.

Argentina
On March 13, the Argentinean government announced an increase in export taxes of up to 44% on some crops, including soybeans. Chaos and farmer demonstrations against the government brought the rural sector to a complete standstill. This has had significant ramifications for the world corn and soybean markets as consumers have had to switch to alternate exporters in order to sure up supplies.

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