A Floor In The Corn Market?

With US corn plantings completed in a very timely manner, and the crop already well established in beneficial warm and wet growing conditions, it may seem strange to suggest that prices may have bottomed ahead of what is probably going to be a record production year.

Yet the USDA surprised the market yesterday by pegging both old and new crop corn carryout significantly lower than the trade had been expecting.

Old crop ending stocks were forecast at 1.603 billion bushels, 135 million below last months report and 121 million below the average trade guess. The 2010/11 carryout came in at 1.573 billion bushels, 258 million below the 1.831 billion bushel trade estimate.

Demand from the ethanol sector was increased by 150 million bushels for old crop and 100 million for new crop.

Meanwhile companies like ADM are continuing to lobby the Environmental Protection Agency to approve ethanol blends containing up to 12 percent ethanol for all cars, up from the existing 10 percent limit.

The coming 2010/11 season will be a record year in terms of corn consumption, the USDA said yesterday, raising demand by 4 MMT from last month to 831.86 MMT, an increase of almost 19 MMT on this season.

News breaking today suggests that China have been back to buy more US corn this week, as prices in the south of the country continue to be buoyed by lack of domestic availability.

The US Grains Council say that Chinese new crop corn plantings haven't gone as well as expected, and that these are running 15-18 days behind schedule, potentially having a negative impact on final yields. This means that there is still plenty of potential to make further sales to China as government temporary reserve stocks have been exhausted by the recent auctions, they say.