China Expects Bumper Corn Crop

Cotton Rallies Past $1 Per Pound

• Cotton futures pushed as much as 3.6% on Tuesday to breach the $1-mark per pound for the first time in nearly a decade, hitting 100.07 cents.

• The day’s high surpassed the October 2011 high at 101.55 cents per pound.

• The turnaround comes after hitting a 1-1/2-month low last week; then, prices were up for the sixth straight session on Tuesday.

• Prices are being fueled by speculators after last week’s low provided a good entry point with short covering also a likely culprit.

• The rise in futures could have spurred some international concern among mills, and it may have prompted some panic buying to hedge against even higher costs.

• Also driving the rise is China, which is aggressively replacing strategic reserves.

• Untimely rains in India as well as a bollworm infestation also could have been a supportive element for cotton futures recently.

FBN’sTake On What It Means:December cotton futures hit a high of 101.55 cents per pound before receding to 100.03 at the close. It is the highest level since October 2011. The new highs will be a cause of concern for mill purchases, and eyes will be on the USDA’s weekly export sales to see if the elevated prices continue to be justified. Eyes also will be on West Texas where untimely rains are in the forecast for the coming days as over half the crop has opened bolls.

China Expects Bumper Crop for Corn, Reduced Prices

• A Chinese government think tank sees domestic corn prices falling to bottom levels between now and December, when farmers will sell newly harvested corn, and amid holidays in the Chinese new year.

• China’s corn futures hit a high in May but have since fallen by about 13%.

• Corn production in the country should be a record high; USDA forecasts 273 million tonnes of corn will be cut with the agency seeing an increase in China’s stocks after a couple of years of decreases.

• To help curb prices, grain imports have been stepped up over the past two years and USDA still sees a strong import year for the country despite the record production forecast.

• Wheat and rice use in feed will likely continue to be high, especially until corn prices ease more.

• In general, China’s feed demand is expected to be strong again this year across livestock sectors.

FBN’sTake OnWhat It Means:The think tank detailed that China’s feedstocks were plentiful but that imports would remain high in order to maintain supplies for the current crop year. However, whether or not China remains a large corn importer is the big question. Right now, China is a key reason as to why global grain prices have been supported, and that is not expected to change in the near term.

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