Corn Rises to Three-Week High on Bets China Will Buy More Grain

Corn rose to a three-week high on speculation that China, the second-biggest producer and consumer, may import more to reduce domestic prices that reached a 20-month high last week.

China grain users are interested in importing corn, with U.S. shipments priced about 200 yuan a metric ton (74 cents a bushel) cheaper than local supplies, according to a state-owned market research center in Beijing. China sold 852,000 tons from stockpiles yesterday in two sets of auctions where prices averaged 1,730 yuan and 1,864 yuan per ton.

“Chinese corn prices are heating up and the government is selling reserves to calm inflation,” said Greg Wagner, a senior market analyst for AgResource Co. in Chicago. “The idea that China may be in a position to import corn makes economic sense. It probably won’t happen until after farmers plant this year’s crop or if weather threatens production.”

Corn futures for July delivery rose 5.25 cents, or 1.4 percent, to $3.685 a bushel on the Chicago Board of Trade, after earlier touching $3.7375, the highest price since March 22. The most-active contract has fallen 11 percent this year on forecasts for production to rise 13 percent in Brazil and Argentina, the biggest exporters after the U.S.

China has been increasing purchases of distiller’s grain, a byproduct of ethanol production from corn, said Dan Cekander, Newedge USA’s director of grain research in Chicago.

Ballooning Sales

The Asian nation boosted purchases of dried distiller’s grain to about 213,000 metric tons in the first two months of 2010, up from 1,250 tons in the same period last year, data from the U.S. Department of Agriculture show. Last year, sales ballooned to a record of more than 542,000 tons from less than 9,000 a year earlier.

“There is talk of active new sales to China,” Cekander said. “China’s appetite is increasing, and this year’s sales may rise to 2 million tons.” That would be the equivalent of about 80 million bushels of corn.

Corn also gained after Archer Daniels Midland Co. canceled 40 contracts for delivery against CBOT futures, exchange data showed. Last week, Cargill Inc. canceled 22 contracts for potential delivery. There were 2,653 contracts (13.265 million bushels) registered for possible delivery, the CBOT said.

“The cancellations are positive,” said Charlie Sernatinger, a Fortis Clearing Americas LLC vice president in Chicago. “Supplies are tightening” because farmers are focused on planting, not selling corn, he said.

Corn, valued at $48.6 billion last year, is the biggest U.S. crop, government figures show.

Jeff Wilson
Source: Bloomberg