China Interest Could Send Corn Sky High

April 29, 2010 10:39 AM

China's small purchase of 115,000 metric tons (5.4 million bushels) of corn yesterday is small. "However, the one-day sale actually trumps the total yearly purchases for each year since 1998,” says Bill Biedermann of Allendale. "In 1994/95, they bought 3.2 mmt (128 million bushels) and in 1995/96 they bought 2.2 mmt (87 million).” (See chart below.)

There are rumors of more purchases in the works. Should they approach those past totals, the corn market could be explosive.

Click for more information on the purchase from Allendale.

One way to cover yourself if that is the case: Buy call options equal to sales you've already made.
Jerry Gulke sees any "China Syndrome" price strength as an opportunity to add to 2010 hedges. His clients are at 85%. "Had this apparent admission that China needs to buy corn for the longer term happened last year or two years ago, we would have had corn 15¢ to 30¢ higher, but now we have a comfortable supply cushion worldwide and the U.S. can afford to sell China 100 to 200 million bushels," he says. "We were approaching the point where we need a Chinese deal or a weather impact to support what appears to be a mega corn crop on the way. Think about this: This news may help to keep the corn planters rolling. I have been thinking of planting another 80 acres to corn before switching to beans, but soybeans also are profitable for now."

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