Global Corn or Maize production may hit a new record of 853 million tons (826 million tons in 2010) in 2011/12 despite the US crop being slightly smaller than last year’s, said International Grains Council (IGC) in a research note. According to IGC, with harvests in North America and Europe entering their final stages, attention is switching to the southern hemisphere, where farmers in Argentina, Brazil and South Africa are set to plant more Maize than in 2010/11.
However, with the total still expected to exceed output, 2011/12 ending stocks are forecast to fall to a five-year low. Trade in the year to June 2012 is forecast to increase by 1% due to strong demand from buyers in parts of Latin America, Asia and North Africa. Due to strong competition from feed-grade Wheat and projected sluggish growth in industrial demand, world use is forecast to increase at a slower than average pace.
November Corn Outlook
Reduced grain crop estimates for some major producers, including for maize in the US, are only partly offset by increases in the Commonwealth of Independent States (CIS) and elsewhere, trimming the global production total for 2011/12 by 3 million tons from October, to 1,816 million tons. This would still represent an increase of 64m. tons over last year, largely due to sizeable recoveries in output in Russia, Ukraine and Kazakhstan.
Despite initial support from US cash markets in early November and a smaller official crop estimate, CME Maize futures in Chicago saw major speculative selling, partly due to increased competition from other exporters but with sentiment considerably dented by worries about the global financial crisis and the collapse of a major brokerage firm.
Corn Market Outlook
Chicago Board of Trade (CBOT) Corn for December delivery fell 0.47 percent to $5.86 per bushel by 0401 GMT. Prices were on track for a 3.9 percent weekly drop, their third straight decline.
Traders have been focusing on demand since the U.S. corn and soybean harvests have ended. Markets are waiting to see whether China will ramp up its purchases of corn with prices slipping below $6 per bushel. The last major purchase of U.S. corn by China was when prices fell below the level.
However, with the total still expected to exceed output, 2011/12 ending stocks are forecast to fall to a five-year low. Trade in the year to June 2012 is forecast to increase by 1% due to strong demand from buyers in parts of Latin America, Asia and North Africa. Due to strong competition from feed-grade Wheat and projected sluggish growth in industrial demand, world use is forecast to increase at a slower than average pace.
November Corn Outlook
Reduced grain crop estimates for some major producers, including for maize in the US, are only partly offset by increases in the Commonwealth of Independent States (CIS) and elsewhere, trimming the global production total for 2011/12 by 3 million tons from October, to 1,816 million tons. This would still represent an increase of 64m. tons over last year, largely due to sizeable recoveries in output in Russia, Ukraine and Kazakhstan.
Despite initial support from US cash markets in early November and a smaller official crop estimate, CME Maize futures in Chicago saw major speculative selling, partly due to increased competition from other exporters but with sentiment considerably dented by worries about the global financial crisis and the collapse of a major brokerage firm.
Corn Market Outlook
Chicago Board of Trade (CBOT) Corn for December delivery fell 0.47 percent to $5.86 per bushel by 0401 GMT. Prices were on track for a 3.9 percent weekly drop, their third straight decline.
Traders have been focusing on demand since the U.S. corn and soybean harvests have ended. Markets are waiting to see whether China will ramp up its purchases of corn with prices slipping below $6 per bushel. The last major purchase of U.S. corn by China was when prices fell below the level.
Commodity corn prices for December 2012 settled at $6.12 a bushel yesterday, while wheat for that month was at $7.505 a bushel. For the most- active contracts with delivery next month, corn was at $6.5325 and wheat was at $6.3875.
Global corn harvests are trailing demand for a third year, says the IGC, which includes more than 50 nations. Stockpiles may slide to 123 million tons this year from 131 million tons the previous year, it said in an Oct. 27 report. Wheat reserves will be 202 million tons, up from 195 million tons, it said.
Investors should buy corn futures that expire in December 2012 and sell wheat for the same month to profit as prices are set to converge, said Ian Bowler, who runs a hedge fund that’s beaten returns in the industry.
While corn’s shrinking stockpiles will boost the grain, global wheat supplies are ample, said Singapore-based Bowler, who helps run the Henderson Agricultural Fund. Investors may capture the spread between those two contracts -- currently about $1.35 a bushel -- as the gap narrows, he said.
His call reflects projections from the London-based International Grains Council, which expects corn reserves to shrink to a five-year low in the year to June 30, while wheat stockpiles climb to the highest in a decade. Any shocks in the corn market may spur shortages, said Bowler, co-manager of the fund with Sydney-based Phil Pyle. Bowler helps managed $160 million and the fund is part of Henderson Global Investors.
“You don’t have a lot of corn and you have a lot of wheat,” said Bowler, who has traded financial derivatives for two decades. The Henderson Agricultural Fund returned almost 27 percent in the first nine months, compared with an average loss of 4.8 percent for commodity hedge funds in the same period, as measured by the Newedge Commodity Trading Index.
Corn for delivery in December next year on the Chicago Board of Trade was $1.385 a bushel cheaper than wheat for the same month at the close yesterday. That’s not far from the 10- year the average of $1.45, according to Bloomberg calculations.
“Over time, that differential should roll and we should end up with the situation when corn and wheat are again trading at close to parity,” said Bowler.
Goldman Sachs Group Inc. (GS) expects wheat to become more expensive than corn, according to its Nov. 2 forecasts for the two commodities in three, six, and 12 months. Wheat may be 25 cents per bushel more costly than corn in three months, 35 cents more expensive in six months and 50 cents more costly in a year, according to the report.
A higher storage rate for wheat in Chicago may discourage index funds from holding long-term positions as the fees “effectively put pressure” on costs, said Bowler.
The maximum storage charge for holders of Chicago wheat shipping certificates rose to about 20 cents a bushel per month from May 18 from about 17 cents, CME Group Inc. (CME), operator of the Chicago Board of Trade, said in April. The highest rate for corn is about 5 cents a bushel, according to CME.
Bowler, who cycles about 50 kilometers (31 miles) on a return trip along Singapore’s east coast every Monday morning, started his career as an options trader on the Sydney Futures Exchange in 1991. He traded his own book for 10 years before joining Sydney-based Attunga Capital Pty Ltd. in 2008.
Henderson Global Investors, the London-based asset manager that oversaw 74.4 billion pounds ($119 billion) as of June 30, completed a takeover of Attunga Agriculture Trading Ltd. in October, said Bowler and Henderson spokesman Richard Acworth. Attunga Agriculture was one of two hedge funds run by Attunga Capital, founded in 2005 by Ian Gibson and partners.
The agricultural fund trades grains, sugar, canola and “a bit” of palm oil, said Bowler. The fund, which can take as much as $500 million, returned 22 percent in 2008, 9 percent in 2009 and 4 percent last year. Pyle, 50, grew up on a dairy farm in Victoria State and together with Bowler handles the fundamental analysis.
Global corn harvests are trailing demand for a third year, says the IGC, which includes more than 50 nations. Stockpiles may slide to 123 million tons this year from 131 million tons the previous year, it said in an Oct. 27 report. Wheat reserves will be 202 million tons, up from 195 million tons, it said.
Investors should buy corn futures that expire in December 2012 and sell wheat for the same month to profit as prices are set to converge, said Ian Bowler, who runs a hedge fund that’s beaten returns in the industry.
While corn’s shrinking stockpiles will boost the grain, global wheat supplies are ample, said Singapore-based Bowler, who helps run the Henderson Agricultural Fund. Investors may capture the spread between those two contracts -- currently about $1.35 a bushel -- as the gap narrows, he said.
His call reflects projections from the London-based International Grains Council, which expects corn reserves to shrink to a five-year low in the year to June 30, while wheat stockpiles climb to the highest in a decade. Any shocks in the corn market may spur shortages, said Bowler, co-manager of the fund with Sydney-based Phil Pyle. Bowler helps managed $160 million and the fund is part of Henderson Global Investors.
“You don’t have a lot of corn and you have a lot of wheat,” said Bowler, who has traded financial derivatives for two decades. The Henderson Agricultural Fund returned almost 27 percent in the first nine months, compared with an average loss of 4.8 percent for commodity hedge funds in the same period, as measured by the Newedge Commodity Trading Index.
Corn for delivery in December next year on the Chicago Board of Trade was $1.385 a bushel cheaper than wheat for the same month at the close yesterday. That’s not far from the 10- year the average of $1.45, according to Bloomberg calculations.
“Over time, that differential should roll and we should end up with the situation when corn and wheat are again trading at close to parity,” said Bowler.
Goldman Sachs Group Inc. (GS) expects wheat to become more expensive than corn, according to its Nov. 2 forecasts for the two commodities in three, six, and 12 months. Wheat may be 25 cents per bushel more costly than corn in three months, 35 cents more expensive in six months and 50 cents more costly in a year, according to the report.
A higher storage rate for wheat in Chicago may discourage index funds from holding long-term positions as the fees “effectively put pressure” on costs, said Bowler.
The maximum storage charge for holders of Chicago wheat shipping certificates rose to about 20 cents a bushel per month from May 18 from about 17 cents, CME Group Inc. (CME), operator of the Chicago Board of Trade, said in April. The highest rate for corn is about 5 cents a bushel, according to CME.
Bowler, who cycles about 50 kilometers (31 miles) on a return trip along Singapore’s east coast every Monday morning, started his career as an options trader on the Sydney Futures Exchange in 1991. He traded his own book for 10 years before joining Sydney-based Attunga Capital Pty Ltd. in 2008.
Henderson Global Investors, the London-based asset manager that oversaw 74.4 billion pounds ($119 billion) as of June 30, completed a takeover of Attunga Agriculture Trading Ltd. in October, said Bowler and Henderson spokesman Richard Acworth. Attunga Agriculture was one of two hedge funds run by Attunga Capital, founded in 2005 by Ian Gibson and partners.
The agricultural fund trades grains, sugar, canola and “a bit” of palm oil, said Bowler. The fund, which can take as much as $500 million, returned 22 percent in 2008, 9 percent in 2009 and 4 percent last year. Pyle, 50, grew up on a dairy farm in Victoria State and together with Bowler handles the fundamental analysis.
