US Corn Reserves to Reach 15-year Low by August

Thursday, December 9, 2010
By Paul Martin

CBOT Corn Review: Climb Higher As Tight Supply Outlooks Underpin

CHICAGO (Dow Jones)–U.S. corn futures ended higher Wednesday, rising on expectations for tighter supply estimates in Friday’s government crop report.

Chicago Board of Trade corn for March delivery, the most-active contract, climbed 12 3/4 cents, or 2.3%, to $5.74 1/2 a bushel.

The gains reveal strong underlying strength in the market, as tight projected supplies and strong usage for ethanol provide a longer-term solid fundamental base, said Shawn McCambridge, senior grains analyst with Prudential Bache in Chicago.

Corn’s strength was impressive in the absence of fresh fundamental news to shape price direction, he said.

The long-term outlook for corn remains supportive as U.S. supplies are projected to reach a 15-year low by Aug. 31, 2011, the end of the crop’s marketing year, analysts said. The U.S. Department of Agriculture is slated to update its supply and demand estimates in a monthly crop report Friday.

Strong ethanol demand should result in lower corn ending stocks in the supply and demand report.

“Despite this fall’s high corn prices, the general operation of ethanol plants has been very economical this year and expanding export shipments of ethanol also seem to be a factor in strong ethanol production,” North America Risk Management Services analyst Jerry Gidel said in a market note.

“The current pace and overseas demand for both ethanol and distillers dried grain, a byproduct of ethanol production, suggests that the USDA could increase its ethanol demand by 100 million bushels or more in its next monthly update on December 10 due to 2010’s pace being at 13.2 billion gallons and possibly 13.9 billion in 2011,” Gidel added.

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