Corn Futures Advance in Chicago on Wider Discount to Wheat

Corn futures advanced after its discount to wheat widened, and crude oil prices gained, boosting the appeal of the grain used as a feedstock in biofuel, reported “Kazakh-Zerno” IA with reference to the “Businessweek“.
Corn for December climbed 0.4 percent to $4.06 a bushel on the Chicago Board of Trade at 9:24 a.m. Singapore time. The grain advanced after closing 0.6 percent lower yesterday, widening its discount to wheat futures by 13 percent to $2.8875 a bushel. Wheat dropped after rising to the highest price in 22 months yesterday as the hottest July in Russia in 130 years withered crops, eroding a global surplus.

Crude oil futures traded near a three-month high after breaching $81 a barrel for the first time since May, as global equities advanced on optimism that the global economic recovery may be sustained. Oil for September delivery added 0.3 percent to $81.59 a barrel in New York.

“What we’re looking at is corn playing a little bit of catch up to those other grains, where it lost value yesterday,” Luke Mathews, a commodity strategist at Commonwealth Bank of Australia, said by phone from Sydney today. “Obviously, we’ve had quite a strong start in the crude oil market and that’s something that’s supportive for grain markets.”

An estimated 71 percent of the corn crop in the U.S., the world’s largest grower and exporter, was rated good or excellent as of Aug. 1, down from 72 percent a week earlier, the nation’s Department of Agriculture said in a report yesterday.

Russian Wheat

Wheat for September delivery lost 0.4 percent to $6.905 a bushel, after trading between $6.8975 and $6.94. It rose as much as 7.5 percent yesterday to $7.1125 a bushel, the highest price for the most-active contract since Sept. 29, 2008.

In Russia, the drought has caused twenty-seven crop- producing regions to declare emergencies, and the Agriculture Ministry said it will cut its grain-crop forecast from 85 million tons. The harvest may fall as low as 72 million tons if the drought persists and will likely come to about 75 million tons under a “normal” scenario, according to the Grain Union.

“The rampant gains that we’ve seen, we would expect in time, to certainly taper off,” Mathews said. Still, he said “the momentum in the market could certainly result in further gains tonight.”

Exports of all grains from Russia may fall to as low as 11 million metric tons in the marketing year that began July 1 under a “worst-case scenario,” from 21.5 million tons a year earlier, the nation’s Grain Union said yesterday, without defining the weather conditions that would result in that scenario.

Export Fall

Wheat exports from Russia, the world’s third-largest shipper in the 2009-2010 season, may drop 23 percent to 14 million metric tons in the year that began July 1, from an estimated 18.2 million tons a year earlier, the USDA Foreign Agricultural Service forecast yesterday.

That compares with wheat exports forecast of 13 million tons this year by International Grain Co., the local unit of Glencore International AG, and 9.5 million tons by the Institute for Agricultural Market Studies.

Wheat futures surged 63 percent through yesterday from this year’s low of $4.255 a bushel on June 9 in Chicago, on concerns drought in Russia, Ukraine, Kazakhstan and the biggest producers in the European Union including France, will curb global supply.

“In the long term, do we expect price gains to be sustained?” Commonwealth Bank’s Mathews said. “The market obviously priced in huge declines in the former Soviet Union crop this year.”

November-delivery soybeans advanced 0.3 percent to $10.125 a bushel, after losing as much as 0.5 percent earlier.

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