CBOT December corn has fallen to $5.40 a bushel, down from almost $6 a bushel in early November. And prices for delivery in March, May and July are barely above $5.50 a bushel: hardly a bullish forward outlook. But the market appears to be ignoring the potential of big – and extremely unusual – imports by China and Russia.
If the imports materialise – and several senior agricultural traders have told me that the physical market in China and Russia is much tighter than Moscow and Beijing have so far acknowledged – prices could rocket next spring.
In a market in which just 500,000 tonnes of extra supply or demand could send prices spiralling higher or lower, traders are talking now about really shocking numbers.
First Russia. The US Department of Agriculture forecasts that the country will buy just 1m tonnes of corn from overseas in 2010-11. But Argentina, which has sent an official delegation to Moscow to discuss a mega-contract to supply Russia, has shocked the commodities market by revealing that Moscow is looking for three times more.
Local traders in Buenos Aires believe the Latin American country will supply about 800,000 tonnes of the total 3m tonnes Moscow is looking for, making it the first time in more than 30 years that Argentina has sold corn to Russia.
Meanwhile, China is already importing unusually large amounts of corn. But more could come. Beijing bought 1.3m tonnes in 2009-10 and the USDA expects it to purchase another 1m tonnes in 2010-11. China had not imported such a big chunk of corn since the 1994-95 crop failure, when it imported 5.5m tonnes over two years.
Senior agricultural traders fear the USDA, which provides the market with benchmark data, is now underestimating the shortage in China and is braced for big purchases. “Believe me, the local market in China is very, very tight,” said a senior executive from a top trading house recently, warning that prices, if he was right, could move much higher in 2011.
With the cost of corn critical for the whole supply chain, as high prices feed into higher prices for poultry, pork, lamb and beef, emerging countries that are already suffering from high inflation could be facing a more intense shock of agflation than previously thought. It also means that commodities markets in Chicago, distracted by the recent dollar surge, have yet to price the upside risk into the new year.
(Source: http://www.ft.com/cms/s/0/2f10a126-fb94-11df-b79a-00144feab49a.html#axzz16fsU0wvc)
Posts
0 comments