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Last updated: July 8, 2011 7:10 pm
Corn markets staged a comeback as China placed big orders and and a heatwave gripped the central US.
This week the US government confirmed that China, once self-sufficient in corn, had purchased at least 540,000 tonnes of this year’s US corn crop. Dan Basse, president of forecasters AgResource, estimated that China had already bought between 5m and 8m tonnes of foreign corn, a so-far unreported sum that would be an import record.
“They haven’t had much luck in battling inflation in food prices,” Mr Basse said of China. “It suggests they may be taking a slightly different tack right now, which is buying commodities and importing them so that they have greater reserve supplies.”
Louis Dreyfus, one of the top four agricultural trading houses, confirmed to the Financial Times that it had sold corn to China this year, declining to specify the quantity. Others declined to comment.
China’s latest purchases followed a steep drop in prices in late June after the US Department of Agriculture reported vastly more corn plantings and stocks than forecasted.
The 92.3m acres sown in the world’s top grain exporting nation could ease fears of precariously low stocks before harvests roll in.
Wholesale corn prices are still 77 per cent higher than a year ago, contributing to higher grocery bills. In June, the UN Food and Agriculture Organisation’s food price index was 39 per cent higher than a year ago, but down from a record reached in February.
In the past week CBOT July corn regained some ground, climbing 4.1 per cent to $6.67 a bushel. Corn delivered after harvest in December rose 6.8 per cent to $6.37¼.
The quality of the corn crop also appeared threatened by heat in a third of the Corn Belt, a stretch of fertile land in the central US. Commodity Weather Group said temperatures of 95F (35C) or more this weekend could put stress on corn as it begins to pollinate, a crucial developmental stage.
“There’s a legitimate concern that corn yields are slipping,” said Richard Feltes, vice president at brokers RJ O’Brien.
One important source of corn demand came under attack in the week, as US senators reached a preliminary agreement to revoke ethanol subsidies by July 31.
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