The price of corn has grown up to the record 30-month high. And there are no preconditions for the price to stabilize. The closest resistance level is at $0.779/b, the high of June 2008. Last month the production volume (which turned out to be lower than expected) was the major market driver. This month it is the increased demand for corn that influences the price. A decline (by 4Mtons) in the crop yield in Mexico expected this winter keeps influencing the market as well.
The consumption of corn has increased by 70M bushels this month. Ethanol producers are currently the main consumers of corn (a 50M increase). The operational income of the ethanol producers was positive in January despite the growing prices on the primary product. However the price dynamics has recently shown a margin decline, which may influence the volumes of ethanol production.
The forecast for the export dynamics remains the same.
The consumption of corn for the production of beverages containing HFCS has been increased by 15M bushels (as compared with January) because of an increase in the export of the HFCS sweetener (made from corn) to Mexico. The demand for HFCS in Mexico is surging because of the growing exports of sugar to the US.
When the production of starch recovered from economic shocks, the demand for corn grew by 5M bushels.
Against the background of the growing demand for corn the production dynamics remains unchanged. Consequently, the stock-to-use ratio of corn has declined by 5% and is nearing the record-low level of 1995/96. While in 1995/96 it was the poor yield of corn crop (caused by unfavorable weather) that was the reason for the price growth, in 2010/11 the price surge has been conditioned by the growing demand for corn shown by ethanol producers and the declining demand for corn as fodder.
The future price dynamics will be influenced by weather and the data on the cultivation areas for corn used in spring. According to the USDA forecast, if the weather conditions are worse than ideal and the demand for corn remains high, the uptrend will go on.
The forecasts for the global production of corn have been lowered:
December and January were droughty in Argentine, which made the forecast for the winter crop yield decline from 23.5M down to 22M tons. Mexico reduced the forecast from 24.5 down to 24 tons as there were floods seen in some areas. The exports of corn from Brazil reached 11.2M tons (a 2.2m increase).
The forecast for the global export of corn for the end of the current marketing year has been increased by 0.4M up to 91.3M tons. The changes in the dynamics of import are smoothened: the forecast for the EU has been increased by 1M tons (up to 5.5M tons) while the combined forecast for South Korea, Mexico, Tunis and Zimbabwe has been reduced by 1M tons.
The US export of corn in the marketing year of 2010/2011 is still 50M tons.
Experts of the Department of Commodity Trading, Masterforex-V Academy, assume that the price of corn will keep growing. The global reserves of corn keep declining in volume as the producters of ethanol need more corn to expand the production. The key resistance levels are $0.7105/b (local high) and $0.779/b (30-month high).
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