Corn prices caught a break from China

In a previous post, corn (futures) prices plummeted on a USDA survey that reported more acreage planted than anticipated. July corn futures price dived from almost $8 to as low as $6.15. This sharp dive in crop prices also dragged down most of the agriculture-related stocks.

However, corn prices rebounced sharply to $6.75 after a report from USDA on US trade data and exports sales released on Wednesday and Friday respectively revealed that China bought 540,000 metric tons of corn from the US just last week, much more than the USDA's forecast of 500,000 tons for the whole year.

China is known to be the largest corn consuming country in the world. However, its timing to import corn has been elusive. USDA, as well as analysts will fumble to revise their exports estimates to China upward significantly.

From Wall Street Journal

The USDA is slated to update its outlook for China's corn imports in a crop report Tuesday. The agency will likely raise the forecast by 3 million to 4 million tons, said Shawn McCambridge, senior grains analyst at Jefferies Bache, a brokerage in Chicago.

USDA chief economist Joe Glauber wouldn't preview next week's report, but said the staff "will certainly be looking at this information" on recent China corn purchases.

"The fact they are in the market is significant," he said. "We expect them to be a bigger and bigger player in the corn market."

Market analysts are also now increasing their China corn import projections. Sudakshina Unnikrishnan of Barclays Capital predicts that China will import about 5 million tons in the 2011-2012 crop year. A month ago, she said she would have forecast about 2 million tons of imports.

"You don't know when or where they are going to make a big splash," said Paul Christopher, international markets strategist at Wells Fargo, "but they will,"

The fact that the Chinese is in the market is certainly bullish for agriculture related stocks such as POT, MOS, AGU, CF.

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Disclosure: The blog author does not own any of the above mentioned positions in her personal account as of July 8, 2011