US corn and soyabean prices will extend their current rally to threaten their all-time highs from 2008 within the next three months, according to the analyst who topped the Reuters poll for a second year running. Prices for both commodities will rise a further 18 percent or more due to the threat of dry La Nina weather in South America and as traders get a sense of this year's demand from China.
Which shocked markets last year by making its biggest US corn purchases since at least 1999, said Charlie Sernatinger, veteran grain analyst with ABN Amro in Chicago. But after hitting highs of $7.50 and $16 respectively, corn and soyabean prices should ease as the US planting season gets underway, said Sernatinger, who had tied with another analyst as the most-accurate corn forecaster in 2009 as well.
"I think we will probably top out in the first quarter ... and then spend the rest of the year backing and filling," Sernatinger said. The grain market's surge in 2010 was unanticipated by the analyst community in January last year. A Reuters poll of 14 analysts taken then found that the average year-end estimate for front-month Chicago Board of Trade corn was $3.84 a bushel. Soyabean prices were seen at $9.09 a bushel.
Sernatinger's guess of $4.60 for corn was the highest, and the closest to the actual December 31 settlement of $6.29 a bushel - a 29-month peak. His soyabean estimate of $11 a bushel also was the most bullish but still fell short of the actual price of $13.93-3/4, which also was a 29-month high.
A drought in Russia that crippled grain exports shocked the futures market and sent corn prices well above expectations in 2010. Soyabean prices gained as the US crop came in short of expectations despite near perfect conditions for planting during the spring and good development in early summer.
"In my philosophy, it is fundamentals that drive markets and it is just speculators that grease the wheels," said Sernatinger, an avid French horn player who sometimes includes "The Far Side" cartoons in his widely read research notes. Corn prices actually sagged during the first half of 2010 due to good planting weather in the United States and a robust South American crop. But the market surged 78 percent during the last six months of the year as the Russian drought underscored the demand for US grain on the world market.
"It basically took the Black Sea out of the market for exports for the second half of the calendar year," said Sernatinger. "Chinese imports of corn - definitely had not been expected," he said, alluding the China's purchase of US corn for the first time in four years last April. Soyabeans also started 2010 weaker before picking up steam with corn and wheat in the second half.
Sernatinger's 2011 forecast called for the rally to finally taper off during the second quarter as many of the questions fuelling the increases will have been answered. China inked deals to import 1.6 million tonnes of US corn last year. Concerns about crop development in Argentina supported corn and soyabean prices as they finished their robust 2010 strongly. Corn prices were up 18.7 percent in December while soyabean prices posted a 12.1 percent gain.
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