Corn prices rebound on renewed Argentina worries

CHICAGO: US corn futures edged higher on Friday, stabilizing after Thursday's steep slide amid renewed concerns about dry weather hurting crops in South America.

Chicago Board of Trade corn for March delivery gained 0.5 percent, or 3 cents, to $6.46-1/2 a bushel at 11:55 a.m. CST.

Prices rose as Informa Economics, a closely watched crop forecaster, became the latest firm to cut its estimate for Argentina's corn crop. It lowered its outlook 11% from December to 24 million tonnes, below the US Department of Agriculture's last estimate of 29 million tons.

Traders are paying close attention to Argentina's crop because it is the world's second largest exporter of corn behind the United States. Traders project export demand may shift to the United States if South American farmers suffer serious crop losses due to dryness.

"The fear is all this bad weather the last couple months is going to translate into lower world production," said Tim Hannagan, analyst for PFG Best.

Meteorologists dialed down expectations for rain in parched areas of Argentina after forecasts for widespread showers pressured prices on Thursday.

Key growing areas will likely receive 1/2 to 1-1/2 inches of rain early next week, not the 1 to 3 inches some forecasters were predicting on Thursday, said John Dee, president of Global Weather Monitoring.

"Those that were buying into the 1 to 3 inches yesterday are the ones that are saying, 'Oh, no, no, it's not as much rain' now," Dee said.

Persistent dryness in Argentina and parts of Brazil has raised concerns about global corn and soybean supplies in the months ahead, lifting benchmark US prices to multimonth highs earlier this week. Farmers are most concerned about corn because part of the crop has entered the critical pollination stage of development.

Soft red winter wheat for March delivery recently traded unchanged at $6.29-1/4 a bushel. March soybeans were down 0.1 percent, or 1 cent, to $12.08 a bushel.

In Argentina's main crop belt, which includes much of Buenos Aires province, Santa Fe, Cordoba and Entre Rios, high temperatures are expected to intensify already-dry conditions.

Several private analysts have already cut their forecasts for corn and soybean production in South America due to the harsh weather. Traders suspect the US Department of Agriculture will follow suit when it issues a monthly supply and demand report on Thursday.

"I do think you're looking at a cut of some sort," said Jim Gerlach, president of A/C Trading.

Farmers in Argentina fear a repeat of a devastating drought that scorched fields and wiped out entire herds of cattle in 2009.

Yet, in a weekly crop report issued on Thursday, the Buenos Aires Grains exchange refused to cut its corn area estimate of 3.74 million hectares, saying relief was on the way.

In Brazil, two important corn and soy regions, Parana and Rio Grande do Sul, made sharp cuts to crop forecasts on Thursday after weeks of dry weather dented harvest prospects.

DEMAND STAYS WEAK

Concerns about the crop losses have not yet significantly boosted demand for US farm products.

US corn export sales last week fell to a seven-week low and soybean sales hit a nine-week low as rising prices limited buyer interest during a holiday-shortened trading week, according to US Department of Agriculture data issued on Friday.

Net corn export sales in the week ended Dec. 29 fell 11 percent from the previous week to 305,900 tonnes, below trade estimates for 350,000 to 550,000 tonnes. Net soybean sales of 281,300 tonnes were below trade forecasts for 400,000 to 550,000 tonnes and down 68 percent from the prior week.

It was "viewed as a little negative" that weather threats in Argentina had not increased sales of corn or soybeans to foreign buyers, said Hannagan of PFG Best.

Net export sales of all varieties of US wheat last week plunged 61 percent to 168,100 tonnes, the lowest level since February 2010. Analysts had expected sales to 300,000 to 450,000 tonnes.

Wheat growers got more bad news about demand as Egypt, the world's top importer of the grain, snubbed the United States in a tender. It bought 240,000 tonnes of wheat from the Black Sea region and France.

Copyright Reuters, 2012