CBOT corn review: Holds firm on supply worries, export demand

U.S. corn futures ended slightly higher Thursday, as the market withstood a sell-off in other grains amid support from extremely tight projected supplies and strong weekly export sales.

Corn for March delivery at the Chicago Board of Trade ended up 3/4 cent to $6.28 per bushel.

While wheat and soybeans fell on a stronger dollar, corn held firm a day after the U.S. Department of Agriculture again slashed 2010-11 carryout. The government projected supplies as a percentage of usage would match a modern low point.

"Everyone's afraid to sell corn," says Arlan Suderman, analyst for Farm Futures.

Many analysts expect prices will ultimately surge above $7. Weekly export sales topped one million metric tons for the second straight week, dispelling the notion for some traders that high prices were choking off demand.

Suderman said the strong export sales were a sign of "panic buying" among countries that are scrambling to secure supplies.

But the export market is not the key factor in setting prices, said Jim Riley, analyst for Linn Group.

"It gets all the press, but at the end of the day for corn it's the domestic market that drives it," Riley said.

Ethanol will consume roughly 40% of the U.S. crop this year, and the industry has gotten increased attention in the wake of Wednesday's USDA report. The cut in projected corn supplies was due mostly to an increase in ethanol output.

Attendees at the Commodity Markets Council's annual conference in Florida Thursday grilled USDA Chief Economist Joe Glauber about what action the government will take if corn futures, already at 31-month highs, continue to climb.

Glauber said demand for corn isn't responding to surging prices, but stopped short of suggesting government intervention is needed in the face of precariously low supplies.

He said the head of the Environmental Protection Agency could suspend federal biofuel mandates, which require refiners to blend billions of gallons of ethanol into the nation's gasoline each year. He did not say that option was being considered, but conceded the ethanol industry "just isn't responding much to price."

(Source: http://www.cattlenetwork.com/cattle-news/latest/CBOT-corn-review-Holds-firm-on-supply-worries-export-demand.html?ref=689)