The lengthy December 21 speech, reflecting on 2010 and looking forward to plans for 2011 emphasised the difficulties of raising output further, including a lack of spare land. Among measures the government planned were increased agricultural subsidies and the implementation of genetically modified crop projects.
The most active corn contract for March delivery added 0.75 cents, or 0.1 percent, to 6.24 dollars per bushel. March wheat futures rose 1 cent, or 0.1 percent, at 7.9925 dollars a bushel. March soybean trimmed 10 cents, or 0.7 percent, to 13.77 dollars per bushel.
The U.S. Department of Agriculture announced a sale of 120,000 tons of U.S. corn to Mexico, which has lifted investors’ confidence in the U.S. corn export prospect, and also heightened investors and end-users’ worries over the tight supply outlook, as the hot and dry weather may cause pollination problems for the corn crop in Argentina, the world’s second largest corn exporter.
Meanwhile, a trader mentioned the speculations that there might be an overbought situation in the corn market after the corn prices stretched their winning streak to ten sessions, has triggered some profit-taking earlier in the session, keeping the gains in check.
A trader attributed the recent strength in the grain market to the consecutive decline in U.S. dollar, as a weaker dollar makes dollar-denominated commodities much cheaper for investors holding other currencies.
However, the corn market edged lower as the U.S. dollar went stronger. The dollar index, which prices the U.S. dollar against a basket of six other currencies, increased marginally to 77.46 from Thursday’s 77.42.
Besides, the weaker-than-expected export sales continued to weigh on corn price. The U.S. Department of Agriculture said on Thursday that U.S. sold 212,478 metric tons in the week ended Oct. 14, falling 77 percent from a week earlier and 72 percent less than the average of the previous four weeks.
Aside from a firmed dollar, the soybean futures was also affected by favorable weather condition. The weather forecast shows that there will be increased rainfall in the dry west- central soybean belt in Brazil, which is conducive to crop growth and as a result, will strengthen the expectation over supply expansion.
The ministry also published a speech by Vice Minister Wei Chaoan, who said China would no longer enjoy surplus corn supplies, although it would strive for self-sufficiency in corn, wheat and rice.
Corn demand is high because of the rapid expansion of the corn processing industry and animal feed production, he said.
The country’s industrial processors are likely to need 70 million tonnes of corn next year, up from 60 million tonnes this year, accounting for more than one-third of the total, above the government’s target of 26 per cent, Wei said.
Those figures, implying demand of 180-210 million tonnes, are far above most estimates. A Reuters poll conducted in October showed a consensus forecast of 165 million tonnes of demand in the 2010/2011 marketing year. Analysts who gave a breakdown put processing demand at 35 million-50 million tonnes.
The ministry’s latest figures were met with scepticism.
“The numbers are nonsense. They’re impossibly high,” said a China-based analyst at a foreign trading house. “It could foreshadow further government moves to control corn’s industrial use in the future. Corn prices are too high and China first needs to be sure it can meet feedmeal demand.”
Mr Wei said demand from feedmills, which use much more corn overall than processors, was rising more slowly.
“According to expert analysis, in general the annual increase in feedmeal demand is about 3 million tonnes, with protein-rich meal going up by more than 1.5 million tonnes,” Mr Wei said.
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