Corn Price 2011 Highest since 2008 as Demand for meat boosted consumption

Corn prices this year reached the highest since touching records in 2008, as rising demand for meat boosted consumption of grain used in livestock feed, and as refining of grain-based fuels increased. While production of both crops will decline this year in the U.S., the world’s largest exporter, output is growing elsewhere.

“With these high prices of corn in the world, people are trying to cut back a little on demand,” Don Roose, the president of U.S. Commodities Inc. in West Des Moines, Iowa, said in a telephone interview. “High prices have been the signal for more production, at the same time.”

Corn futures for December delivery dropped 0.7 percent to settle at $6.4075 a bushel on the CBOT, the first drop in three days. The most-active contract earlier reached a two-week high of $6.55, after yesterday jumping the exchange limit of 40 cents. The price has gained 11 percent in the past year.

World corn production in the crop year that began Oct. 1 will be a record 860.09 million tons, up 3.8 percent from a year earlier, the USDA said. The agency boosted its forecast for China’s crop by 2.2 percent to a record 182 million tons, and said Ukraine will harvest 21 million tons, up 76 percent from last year.

“The increased crops in China and Ukraine will deter U.S. exports,” Rich Nelson, the director of research for McHenry, Illinois-based Allendale Inc., said in a telephone interview. “Exports will be weaker, but lower prices may spur some fresh buying.”

U.S. corn exports in the marketing year that began Oct. 1 will fall to 40.64 million tons, down 13 percent from last year and the lowest since 2003, the USDA said today. Wheat exports forecast at 26.54 million tons were below last month’s estimate and 25 percent smaller than last year.

“Corn demand side of the corn balance sheet is understated, Teucrium’s Gilbertie said. “Demand at these prices is more inelastic,” limiting additional losses because margins for meat and fuel producers have improved, Gilbertie

Corn is the biggest U.S. crop, valued at $66.7 billion in 2010, followed by soybeans at $38.9 billion, USDA data show. Wheat ranks fourth at $13 billion, behind hay.

December live cattle fell 0.40 cent to $1.2122 a pound; November feeder cattle gained 0.20 cent to $1.4332 a pound; and December lean hogs rose 0.68 cent to 87.45 cents a pound.

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