Monday, July 12, 2010

"China’s Corn Imports May Grow 10-Fold, Marubeni Says" and "The Downside Of Corn’s Higher Prices" (CORN; ADM; PEIX)

On June 30 we were struck by the action in corn, "Surprising Corn Numbers".
Here's a reason to look not at the physical, the futures or the ETF (yes, there's an ETF for that) but rather at storage and logistics.
From BusinessWeek:

China, the world’s second-largest corn consumer, may give up efforts to be self-sufficient in the commodity and boost imports 10-fold by 2015 to feed livestock, said a researcher at Japan’s biggest grain trader.
Imports may expand to 10 million metric tons from about 1 million tons forecast for this marketing year as the Asian nation will turn to cheap corn supplies from overseas for feed production, said Akio Shibata, chief representative for trading company Marubeni Corp’s research institute.

Imports of that volume would make China the second-largest importer after Japan, which buys more than 16 million tons a year, based on data from the U.S. Department of Agriculture’s Foreign Agricultural Service. Increased buying may further bolster corn futures in Chicago, which have gained 11 percent in the past year, potentially raising costs for feed mills and meat producers.

“If China becomes a constant buyer, the global corn market will become tight as the U.S. will increase the use of its grain for ethanol production, limiting its export capacity,” said Kazuhiko Saito, an analyst at Tokyo-based commodity broker Fujitomi Co....MORE

And from Hard Assets Investor:
Today's opening bell at the NYSE was rung by the muckety-mucks who run the Teucrium Corn Fund (NYSE Arca: CORN), a newly launched tracker of maize futures we last updated on July 1 ("The BULLISH News From Yesterday's Market").
CORN's launch timing couldn't have been better. Not long after its June debut, surprisingly low stocks and planting intention reports sent already-skittery maize prices soaring. There's no better advertisement for a long-only fund than a bullish turnaround.
While corn (and CORN) traders are enjoying their recent gains, however, long-suffering ethanol investors have been buffeted. Just when the horizon seemed to be brightening, ethanol crush margins were, um, crushed by the price spike.

Ethanol Crush
Ethanol Crush

The gross crush margin has sunk 20 percent since the end of April. Most of crushers' troubles coincided with corn's price rise, but weakness in another output—distillers' dry grains—added to their woes. DDGs are the fibrous remains of corn crushing, sold mainly as animal feed....MORE