Corn dips after record high; rally may not be over

SYDNEY - US corn futures dipped on Wednesday after racing to a record high in the previous session, but worries that US supplies could run out kept a floor under prices ahead of key US data on Friday.

Corn has gained more than 15 percent in the four days to Tuesday, since a US government report showed unexpectedly low stocks as of March 1, raising concerns that the US Department of Agriculture will further cut its end-of-season inventory estimate due out on Friday.

"It’s come as a surprise to me the last couple of trading sessions. I didn’t think corn had the legs to do it but it certainly has," said Jonathan Barratt, managing director at Commodity Broking Services.

"I think people are looking at it from an ethanol point of view. Ethanol consumption is at a record high. It’s a flavor, so you’d expect expectations for it to continue to trade higher."

While corn is primarily a feed grain, large amounts are also being used to produce the renewable fuel ethanol, prompting some analysts to forecast that corn could hit as high as $9 a bushel this year.

Chicago Board of Trade corn for May delivery slipped 0.3 percent to $7.64-3/4 a bushel. The contract hit an all-time peak of $7.70-3/4 on Tuesday.

"The moves had been just astronomical. Now that we’re at these levels, you can just put another level, like $8, and see how it goes," said Barratt.

Technical charts show corn may continue to rise towards $8.05-1/2, after breaking two resistance levels at $7.35 and $7.49-3/4, said Reuters market analyst Wang Tao.

With US corn stocks at low levels, market players are on edge about rainy weather in the US Midwest which is threatening to delay planting of the new corn crop, adding to worries about shorter supply.

Further tightening supply, China may import an additional 2 million to 3 million tons of corn by September, the US Grains Council said on Tuesday.

But China’s latest interest rate increase announced on Tuesday, its fourth hike since October, may halt the corn rally, said Ker Chung Yang, analyst at Phillip Futures in Singapore.

(Source: http://www.malaya.com.ph/apr12/agri2.html)