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Corn Drops as Demand for U.S. Exports May Slide on China Curbs

June 9, 2014
Port of New Orleans trade
  
 
 

Corn fell in Chicago, extending four weeks of declines, on speculation that demand for U.S. exports will decrease after China put curbs on purchases of a feed ingredient made from the grain.

China’s quarantine agency suspended issuing permits to import U.S. dried distillers’ grains, an ethanol by-product known as DDGS, according to three trading executives whose applications were denied. Permits were halted because the government deems DDGS a high risk of containing MIR 162, a genetically modified strain of corn that China hasn’t approved, according to the sources who asked not to be identified as they are not authorized to speak to the media.

Corn "is down today on the back of that Chinese news," Dave Norris, an independent grain broker in Harrogate, England, said by e-mail. "It seems to put resolving the MIR 162 issue even further away down the line."

Corn for delivery in July dropped 0.9 percent to $4.5475 a bushel at 6:12 a.m. on the Chicago Board of Trade. The grain fell 1.4 percent last week, a fourth weekly decline, and touched $4.47 a bushel on June 6, the lowest since Feb. 14. Prices are down 12 percent since the end of April.

China is the largest buyer of DDGS, a livestock feed that is produced when corn is stripped of starch when making ethanol. While U.S. corn shipments to China plunged amid restrictions on the MIR 162 variety, imports of DDGS continued to rise because some port officials had been lenient, said Sylvia Shi, an analyst at Shanghai JC Intelligence Co. China was the third- biggest importer of U.S. corn in 2012-13, after Japan and Mexico, U.S. Department of Agriculture data show.

 

U.S. Weather

 

Futures also fell on signs that U.S. crops are developing in good condition amid ample rain. The U.S. Corn Belt may see sufficient moisture in the next two weeks with "no lasting heat or drying," helping maintain "excellent growing conditions" for most areas, QT Weather said. Seventy-six percent of corn in the main U.S. growing areas was in good or excellent condition as of June 1, according to the USDA, which is set to update its weekly crop ratings report today.

The U.S. harvest, the world’s biggest, may climb to a record 13.939 billion bushels in the 2014-15 season, according to a Bloomberg News survey of analysts. The USDA is scheduled to update its forecast on June 11.

Soybeans for November delivery rose 0.5 percent to $12.245 a bushel. U.S. farmers finished planting about 78 percent of intended soybean area as of June 1, according to the USDA. The harvest may climb to a record 3.631 billion bushels, Bloomberg’s survey showed.

Wheat for delivery in July fell 0.4 percent to $6.155 a bushel in Chicago, after earlier touching $6.2625, the highest level since June 2. Prices fell 1.4 percent last week, reaching $6.03 on June 6, the lowest since Feb. 28, amid expectations that world inventories before the 2015 Northern Hemisphere harvest will be bigger than the USDA predicted in May.

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