CORN PRICES have soared above wheat on international futures exchanges for the first sustained period since 1996.
There was a brief spike this April on the Chicago Board of Trade where corn traded above wheat, but over the past week and a half, since the recent US Department of Agriculture (USDA) World Agricultural Supply and Demand Estimates (WASDE) report was released, corn has remained on top for the first continuous period since the mid 90s.
In spite of a 3.5pc drop in the July contract on Tuesday night, corn sat at US755 cents a bushel, a healthy margin ahead of wheat at US731c/bu.
Steve Powell, agricultural commodities economist with MarketCheck, said it was primarily a weather market driving corn up.
“The WASDE numbers were very bullish for corn prices, with stocks in the US so tight.”
Tom Puddy, head of marketing at CBH, said it was a combination of weather and energy demand driving corn up.
“The corn for ethanol story continues to surge, while we also have a very strong weather market, along with demand from China, these are the key factors at the moment.”
Mr Powell said although wheat was below corn, the high corn values were providing a solid base for low grade Australian wheats, in particular old crop.
At the other end of the scale, he said there is a shortage of high protein wheat likely to mean solid support for the higher quality paygrades in new crop values.
“We essentially have two key drivers at the different ends of the market, the corn complex is pushing feed grains along, while the spread continues to widen for high protein wheat.”
At the lower end of the scale, he said the substitutability between wheat and corn as a feed stock had helped farmers with old crop feed wheat.
“There’s definite demand for old crop.”
Mr Puddy agreed, saying there was solid demand from Asia.
“There is enquiry from China, the Philippines, Korea, right through Asia, as corn prices continue to rise.”
Wheat is generally regarded as 15pc more efficient feedstock than corn.
Mr Powell said it was not just feed wheat that was moving, feed barley and sorghum are also attracting interest.
“There is a focus at present on clearing the physical stocks.
“We are hearing of feed barley coming out from on-farm storage, there are bids out there and strong delivered demand into large northern domestic end-user markets.”
In terms of sorghum, he said the key market driver was the international corn situation.
“It is generally trading at its substitutability range against corn into south-east Asia.”
Mr Powell said there had been a lot of talk among analysts that the current pricing with corn above wheat was unsustainable, due to the intrinsic values of the crops. However, US analysts are speculating it could be a medium-term run for corn above wheat, due to a range of factors, include feed supply, the harvest cycle, which means corn producers can maintain supply better to end users and the ethanol market.
Weather factors continue to play a role across all the grain commodities.
Mr Powell said late rain in Europe was to boost crops significantly in France and Germany.
Mr Puddy said it was too late to do much good in the major production zones there.
“Too little, too late is what we are hearing.
However, the harvest of the US winter wheat crop, which was hit by drought, has begun and is better than expected, which is why the WASDE numbers were slightly bearish for wheat itself.
But Mr Powell said there were still a range of unknowns that could boost prices in the short-term.
“We are getting some reports of emerging dryness in Russia, and we are long way from knowing what the harvest will do in the former Soviet Union (FSU).
“Looking back on last year, it wasn’t until June / July that the extent of the drought there became known.”
Mr Puddy said he expected the high protein issue to gather strength through the year.
“Internationally, high protein wheat is in short supply, and we already have a large spread in the market.”
“I would expect we will continue to see that spread widen and the protein market to stay firm.”
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