Corn, the best-performing grain this year, is heading for the biggest annual gain in four years, as dry weather in Argentina, the world's second-largest corn shipper, threatens to widen a global output deficit.
March-delivery corn added 0.3 percent to $6.1775 a bushel on the Chicago Board of Trade at 2:44 p.m. in Manila, taking this year's gain to 49 percent, the second annual advance. That makes it the best-performing grain on the Thomson Reuters/Jefferies CRB Index this year.
Global corn inventories were forecast by the U.S. Department of Agriculture to drop to a four-year low of 130 million metric tons at the end of this season, as demand outstrips production, driven by increased use in livestock and poultry feeds in China and ethanol in the U.S. The USDA estimate on Dec. 10 assumed Argentina's corn output will reach a record 25 million tons, unhurt by dry weather.
"We've seen the weather in Argentina and other parts of South America and that will probably result in some crop losses," Michael Pitts, commodity sales director at National Australia Bank Ltd., said by phone from Sydney today. The USDA will likely lower its global production estimates in its January report, supporting prices through the middle of 2011, he said.
Corn demand was forecast by the USDA to outstrip production by 17.2 million tons this season, as global harvests of wheat were ravaged by drought and excessive rains, tightening supply of grains used in food and livestock feeds.
Wheat Production
Production of wheat was forecast to lag behind demand by 20 million tons, taking inventories at the end of this season to the lowest level since 2008-2009, according to USDA data.
March-delivery wheat was little changed at $7.85 a bushel in Chicago, taking this year's gain for the most-active contract to 45 percent.
Global production of cereals, including corn and wheat, will lag behind demand this year for the first time in three years, according to a report released by the United Nations' Food and Agriculture Organization earlier this month.
Output of all cereals will drop 1.4 percent to 2.23 billion metric tons this season, while demand will rise 1.8 percent to 2.26 billion tons, it said.
"On the fundamentals for wheat, we don't think too much has changed over the last couple of weeks," Pitts said. The impact of dry weather on Argentina's corn crop "will be supportive of wheat. We expect investor inflows" into grains, he said.
Soybeans Advance
Soybeans for March delivery added 0.6 percent to $13.845 a bushel in Chicago, taking gains for the most-active contract to 32 percent this year, the second annual gain.
China's northeast Heilongjiang province failed to sell the 191,517 tons of soybeans offered in a reserve auction today, researcher Cnyouzhi.com said on its website.
This was the fourth series of auctions in which crushers didn't take any of the oilseed on offer as prices offered were not competitive against the market rate, the researcher said.
The prices offered today ranged from 3,750 yuan ($568) to 3,790 yuan a ton, it said.
Argentina's soybean crop, the world's third-biggest, may face another month of drought caused by La Nina weather conditions, Jim Dale, senior meteorologist at British Weather Services, a High Wycombe, England-based forecaster, wrote in an e-mailed comment.
